Sales: Chose in Possession

SALES
SALES b. Illicit object

6. Presence or absence of conditions:
Q: What is a sale? a. Absolute
b. Conditional
A: Sale is a contract where one party (seller) 7. Wholesale or retail:
obligates himself to transfer the ownership of and a. Wholesale
to deliver a determinate thing, while the other b. Retail
party (buyer) obligates himself to pay for said 8. Proximate inducement for the sale:
thing a price certain in money or its equivalent. a. Sale by description
(Tolentino, p.1, 2000 ed.) b. Sale by sample
c. Sale by description and sample
I. INTRODUCTION 9. When the price is tendered:
a. Cash sale
A. DEFINITION OF THE CONTRACT OF SALE b. Sale on installment plan
Q: What is a contract of sale? AS TO PRESENCEOR ABSENCE OF CONDITION
A: By the contract of sale, one of the contracting ABSOLUTE SALE
parties obligates himself to transfer the Q: When is a sale absolute?

ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in
money or its equivalent. (Art. 1458, NCC) A: The sale is absolute where the sale is not
KINDS OF SALES subject to any condition whatsoever and where
the title passes to the buyer upon delivery of the
Q: What are the different kinds of sales? thing sold. (De Leon, p. 15)
A: As to: Q: When is a deed of sale considered absolute in

nature?
1. Nature of the subject matter:
a. Sale of real property; A: A deed of sale is considered absolute in nature
b. Sale of personal property where there is neither a stipulation in the deed
2. Value of the things exchanged: that title to the property sold is reserved in the
a. Commutative sale; seller until the full payment of the price, nor one
b. Aleatory sale giving the vendor the right to unilaterally resolve
3. Whether the object is tangible or the contract the moment the buyer fails to pay
intangible: within a fixed period.
࿿࿿࿿ø䫞❑࿿࿿࿿࿿࿿࿿࿿࿿࿿ùᘒ圇࿿࿿࿿࿿࿿࿿࿿࿿࿿ú뿮劓࿿࿿࿿࿿࿿࿿࿿࿿࿿û古㢿࿿࿿࿿࿿࿿࿿࿿࿿࿿ü匠≯࿿࿿࿿࿿࿿࿿࿿࿿
ýǆ娂࿿࿿࿿࿿࿿࿿࿿࿿࿿þ㓢237Ċ䑦沋࿿࿿࿿࿿࿿࿿࿿࿿࿿ċ ࿿࿿࿿࿿࿿࿿࿿࿿࿿Čፌ⃌࿿࿿࿿࿿࿿࿿࿿࿿࿿č줺य़࿿࿿࿿࿿࿿࿿࿿࿿࿿
Ď䙸䇗࿿࿿࿿࿿࿿࿿࿿࿿࿿ď戞燥࿿࿿࿿࿿࿿࿿࿿࿿࿿Đ뚨乂࿿࿿࿿࿿࿿࿿࿿࿿࿿đ䏸࿿࿿࿿࿿࿿࿿࿿࿿࿿Ē巺椡࿿࿿࿿࿿࿿࿿࿿࿿࿿
ēᥪ窿࿿࿿࿿࿿࿿࿿࿿࿿࿿Ĕ륨幍࿿࿿࿿࿿࿿࿿࿿࿿࿿ĕ Sale of property (tangible or
corporeal); CONDITIONAL SALE
Note: A tangible object is also called Q: When is a sale conditional?
chose in possession
b. Sale of a right (assignment of a A: It is conditional where the sale contemplates a
contingency, and in general, where the contract is
right, or a credit or other
subject to certain conditions, usually in the case
intangibles such as copyright,
of the vendee, the full payment of the agreed
trademark, or good will);
purchase price and in the case of the vendor, the
Note: An intangible object is a fulfillment of certain warranties. (De Leon, p. 15)
chose in action.
23 Validity or defect of the transaction:

23 Valid
24 Rescissible
25 Voidable
26 Unenforceable
27 Void
24 Legality of the object:
23 Licit object
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE Facultad
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DerechoCivil
229
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II UNIVERSITY OF SANTO TOMAS
UST GOLDEN NOTES 2011
23 Distinguish a conditional sale from an B. ESSENTIAL REQUISITES

absolute sale OF A CONTRACT OF SALE
A: Q: What are the elements of a contract of sale?

CONDITIONAL SALE ABSOLUTE SALE
One where the title to 23ANE
One where the seller is the property is not 23 Accidental elements – dependent on
granted the right to reserved to the seller or parties’ stipulations; Examples:
unilaterally rescind the if the seller is not 23 Conditions
contract predicated on granted the right to 24 Interest
the fulfillment or non‐ rescind the contract 25 time & place of payment
fulfillment, as the case based on the fulfillment
26 penalty
may be, of the or non‐fulfillment, as the
prescribed condition. case may be, of the
24 Natural elements – those that are
prescribed condition.
inherent even in absence of contrary
Contracts, first the
contract to sell (which is
provision.
conditional or E.g. warranties
Contract executed preparatory sale) and
second, the final deed of 25 Essential elements – for validity:
between the seller and 23 Consent
sale or the principal
the buyer 24 Determinate subject matter
contract which is
executed after full 25 Consideration
payment of the purchase
price 23 What is the effect and/or consequence of the
absence of consent of the owner in a contract of
23 What is the effect of the non‐performance of sale of said property?
the condition or if the condition did not take
place? 0 The contract of sale is void. One of the
essential requirements of a valid contract of sale
23 Where the obligation of either party to a is the consent of the owner of the property.
contract of sale is subject to any condition which
is not performed, such party may refuse to FORMALITIES REQUIRED
proceed with the contract or he may waive
performance of the condition. Unlike in a non‐ 0 Is there a formal requirement for the validity
fulfillment of a warranty which would constitute a of a contract of sale?
breach of the contract, the non‐happening of the
condition, although it may extinguish the A:
obligation upon which it is based, generally does GR: No form is required. It is a consensual
not amount to a breach of a contract of sale. contract. (Pineda, p. 78)
23 In a sale with assumption of mortgage, is the XPN: Under Statute of Frauds, the following
assumption of mortgage a condition without contracts must be in writing; otherwise, they
which there will be no perfected contract of shall be unenforceable:
sale? 0 Sale of personal property at a price not
less than P500;
23 Yes. In sales with assumption of mortgage, the 1 Sale of a real property or an interest
assumption of mortgage is a condition to the therein;
seller’s consent so that without approval by the 2 Sale of property not to be performed
mortgagee, no sale is perfected (Ramos v. Court within a year from the date thereof;
of Appeals, G.R. No. 108294 Sept. 15, 1997) 3 When an applicable statute requires
that the contract of sale be in a certain
form. (Art. 1403, par.2)
Note: Statute of Frauds applies only to executory

contracts but not to partially executed contracts.
(Pineda, p.81)
CIVIL LAW TEAM:
230 ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA, OZAN J.
FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM
SALES
0 Are there instances where the Statute of B. OPTION CONTRACT

Frauds is not essential for the validity of a
contract of sale? 23 What is an option contract?
5888 Yes. 5888 A contract granting a privilege in one

5888 When there is a note or person, for which he has paid a consideration,
memorandum in writing and subscribed which gives him the right to buy certain
to by the party or his agent (contains merchandise or specified property, from another
essential terms of the contract); person, at anytime within the agreed period, at a
5889 When there has been partial fixed price. Note: Consideration in an option
performance/execution (seller delivers contract may be anything or undertaking of value,
with the intent to transfer title/receives unlike in sale where it must be a price certain in
price); money.
5890 When there has been failure to
object to presentation of evidence 0 What is the nature of an option contract?
aliunde as to the existence of a contract
without being in writing and which is 0 It is a preparatory contract in which one party
covered by the Statute of Frauds; grants to another, for a fixed period and at a
5891 When sales are effected through determined price, the privilege to buy or sell, or
electronic commerce. (Villanueva, p. 92) to decide whether or not to enter into a principal
contract. It binds the party who has given the
5888 STAGES OF A CONTRACT OF SALE option not to enter into the principal contract
with any other person during the period
23 What are the 3 stages involved in the designated, and within that period, to enter into
formation of a contract of sale? such contract with the one whom the option was
granted, if the latter should decide to use the
A: option. It is a separate and distinct contract.
23 Negotiation/ Policitation
24 Perfection Note: If the option is perfected, it does not result in
the perfection or consummation of the sale. (Diaz,
25 Consummation
p.7)
23 NEGOTIATION/PREP
0 What is the period within which to exercise
ARATORY A. OFFER the option?
23 What are the rules in the conception stage
A:
about the offer?
0 Within the term stipulated
1 If there is no stipulation, the court may
A: fix the term
OFFER IS RULE
FLOATED Notes: An action for specific performance to enforce
AND IT IS: the option to purchase must be filed within 10 years
Offer is Prior to acceptance, may be from the time the cause of action accrues.
withdrawn at will by offeror but no
floated authority to modify it The implied renewal of the lease on a month‐to‐
month basis did not have the effect of extending the
Must be accepted within the period, life of the option to purchase which expired at the
With a otherwise, extinguished at the end of end of the original lease period. The lessor is correct
period and may be withdrawn at will in refusing to sell on the ground that the option had
period by offeror but must not be arbitrary, expired. (2001 Bar Question)
otherwise, liable for damages
Q: How is an option exercised?
With a Extinguished by happening/ non‐
condition happening of condition 0 A notice of acceptance must be communicated to
without Continues to be valid depending upon offeror even without actual payment as long as
period/ circumstances of time, place and payment is delivered in the consummation stage.
condition person
With a Original offer is extinguished

counter‐
offer
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE Facultad DerechoCivil 231
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VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C. MARTINEZ
0 What is the effect of a separate consideration 0 NDC and Firestone entered into a contract of
in an option contract? lease wherein it is stipulated that Firestone has
the right of first refusal to purchase the leased
A: property "should lessor NDC decide to sell the
0 With separate consideration: same”. After the rumor that NDC will transfer
0.0 Contract is valid the lot to PUP, Firestone instituted an action for
0.1 Offeror cannot withdraw offer until specific performance to compel NDC to sell the
after expiration of the option property in its favor. PUP moved to intervene
0.2 Is subject to rescission & damages arguing that the Memorandum issued by then
but not specific performance President Aquino ordered the transfer of the
whole NDC compound to the Government,
1 Without separate consideration: which in turn would convey it in favor of PUP.
1.0 the option contract is not deemed Can Firestone exercise its right of first refusal?
perfected
1.1 offer may be withdrawn at any time 0 Yes. It is a settled principle in civil law that
prior to acceptance when a lease contract contains a right of first
refusal, the lessor is under a legal duty to the
Note: However, even though the option was not lessee not to sell to anybody at any price until
supported by a consideration, the moment it was after he has made an offer to sell to the latter at a
accepted, contract of sale is perfected. (Art. 1324) certain price and the lessee has failed to accept it.
The lessee has a right that the lessor's first offer
0 What is the effect of acceptance and shall be in his favor. (PUP v. CA, G.R. No. 143513,
withdrawal of the offer? Nov. 14, 2001)
0 If the offer had already been accepted and 0 In a 20‐year lease contract over a building, the
such acceptance has been communicated to lessee is expressly granted a right of first refusal
before the withdrawal is communicated, the should the lessor decide to sell both the land and
acceptance creates a perfected contract, even if building. However, the lessor sold the property
no consideration was as yet paid for the option. to a third person who knew about the lease and
in fact agreed to respect it. Consequently, the
In which case, if the offeror does not perform his lessee brings an action against both the lessor‐
obligations under the perfected contract, he shall seller and the buyer (a) to rescind the sale and
be liable for all consequences arising from the (b) to compel specific performance of his right of
breach thereof based on any of the available first refusal in the sense that the lessor should be
remedies such as specific performance, or ordered to execute a deed of absolute sale in
rescission with damages in both cases. favor of the lessee at the same price. The
defendants contend that the plaintiff can neither
C. RIGHT OF FIRST REFUSAL seek rescission of the sale nor compel specific
performance of a "mere" right of first refusal.
Q: What is the right of first refusal? Decide the case.
0 It is a right of first priority, all things and A:

conditions being equal; identity of the terms and 0 The action filed by the lessee, for both
conditions offered to the optionee and all other rescission of the offending sale and
prospective buyers, with optionee to enjoy the specific performance of the right of first
right of first priority. It creates a promise to enter refusal which was violated, should
into a contract of sale and it has no separate prosper. The ruling in (Equatorial Realty
consideration. Development, Inc. v. Mayfair Theater,
Inc., G.R. No. 106063, Nov. 21, 1996), a
Note: A deed of sale executed in favor of a 3rd party case with similar facts, sustains both
who cannot be deemed a purchaser in good faith, rights of action because the buyer in the
and which is in violation of the right of first refusal subsequent sale knew the existence of
granted to the optionee is valid but rescissible. (Arts. right of first refusal, hence, in bad faith.
1380, 1381 [1])
1 The action to rescind the sale and to
compel the right of first refusal will not
prosper. (Ang Yu Asuncion v. CA, G.R.
CIVIL LAW TEAM:
SALES
No. 109125, Dec. 2, 1994). The court Note: It is applicable only to executory contracts and
ruled that the right of first refusal is not not to contracts which are totally or partially
founded upon a contract but on a quasi‐ performed.
delictual relationship covered by the
principles of human relations and unjust If a particular form is required under the Statute of
enrichment (Art 19, et seq. Civil Code). Frauds: sale is valid & binding between the parties
rd
Hence, the only action that will prosper but not to 3 persons.
according to the Supreme Court is an
action for damages in a proper forum 512 May the right of first refusal be waived?
for the purpose. (1998 Bar Question)
Note: The offer of the person in whose favor the right of 0 Yes. Like other rights, the right of first refusal
first refusal was given must conform with the same may be waived or when a party entered into a
terms and conditions as those given to the offeree. compromise agreement. (Diaz, p. 55)
0 Andres leased his house to Iris for a period of 0 Differentiate an option contract from a right
2 years, at the rate of P25, 000 monthly, payable of first refusal.
annually in advance. The contract stipulated that
it may be renewed for another 2‐year period 0 An option contract is a preparatory contract in
upon mutual agreement of the parties. The which one party grants to another, for a fixed
contract also granted Iris the right of first refusal period and at a determined price, the privilege to
to purchase the property at any time during the buy or sell, or to decide whether or not to enter
lease, if Andres decides to sell the property at into a principal contract. It binds the party who
the same price that the property is offered for has given the option not to enter into the
sale to a third party. Twenty‐three months after principal contract with any other person during
execution of the lease contract, Andres sold the the period designated, and within that period, to
house to his mother who is not a third party. Iris enter into such contract with the one whom the
filed an action to rescind the sale and to compel option was granted, if the latter should decide to
Andres to sell the property to her at the same use the option. It is a separate and distinct
price. Alternatively, she asked the court to contract.
extend the lease for another two years on the
same terms. In a right of first refusal, while the object may be
determinate, the exercise of the right would be
0 Can Iris seek rescission of the sale of the dependent not only on the grantor’s eventual
property to Andres’ mother? intention to enter into a binding juridical relation
with another but also on terms, including the
0 Iris can seek rescission because pursuant to price, that are yet to be firmed up. (Diaz, p. 54)
Equatorial Realty Co. v. Mayfair Theater rescission
is a relief allowed for the protection of one of the
contracting parties and even third persons from OPTION RIGHT OF FIRST
all injury and damage the contract of sale may CONTRACT REFUSAL
cause or the protection of some incompatible and Principal contract; Accessory; cannot stand
preferred right. stands on its own on its own
Needs separate Does not need separate
5888 Will the alternative prayer for extension of consideration consideration
the lease prosper? Subject matter & price There must be subject
matter but price not
must be valid
0 No, the extension of the lease should be upon important
the mutual agreement of the parties. (2008 Bar Not conditional Conditional
Question) Not subject to specific Subject to specific
performance performance
23 Is it necessary that the right of first refusal be
embodied in a written contract?
23Yes, the grant of such right must be clear and

express.
VICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE Facultad DerechoCivil
de 233
D. POLICITATION/MUTUAL PROMISE TO BUY interest on the contract to the time the contract
AND SELL/ comes into existence the perfection stage upon
the concurrence of the essential elements
Q: What is policitation? thereof. (Sps. Raet & Sps. Mitra v. CA, G.R. No.
128016, Sept. 17, 1998)
0 Policitation is defined as an unaccepted
unilateral promise to buy or sell. This produces no 0 Severino executed two deeds when he sold
judicial effect and creates no legal bond. This is a his property to Henry so that Henry can obtain a
mere offer, and has not yet been converted into a loan with Philam Life. He also authorized Henry
contract. It covers the period from the time the to file an ejectment suit against the lessees and
prospective contracting parties indicate interest in when the prayer for ejectment was granted,
the contract to the time the contract is perfected. Henry took possession of the property. Severino
(Villanueva, p. 6). now claims ownership over the property
claiming that the sale is fictitious therefore there
0 Is there a legal bond already created in the was no sale to speak of. Is Severino’s contention
negotiation stage? correct?
0 None. In negotiation (policitation) stage, the 23 No. There is a perfected contract of sale due to
offer is floated as well as the acceptance. the second deed of sale in this case. The basic
characteristic of an absolutely simulated or
0 PERFECTION
fictitious contract is that the apparent contract is
not really desired or intended to produce legal
Q: When is a contract of sale deemed perfected?
effects or alter the juridical situation of the parties
in any way. However, in this case, the parties
A:
already undertook certain acts which were
GR: It is deemed perfected at the moment
directed towards fulfillment of their respective
there is meeting of minds upon the thing
covenants under the second deed, indicating that
which is the object of the contract and upon
they intended to give effect to their agreement.
the price. (Art.1475, par.1)
Further, the fact that Severino executed the two
deeds, primarily so that Henry could eject the
XPN: When the sale is subject to a suspensive
tenant and enter into a loan/mortgage contract
condition by virtue of law or stipulation.
with Philam Life, is a strong indication that he
intended to transfer ownership of the property to
5888 Spouses Raet and Mitra negotiated
Henry. For why (Hernando R. Penalosa v. Severino
with Gatus about the possibility of buying his
Santos, G.R. No. 133749, Aug. 23, 2001)
rights to certain units at a subdivision developed
by Phil‐ Ville for them to be qualified to obtain
loans from GSIS. They paid an amount for which 23 What is the effect of Severino’s and Henry’s
Gatus issued them receipts in her own name. failure to appear before the notary public who
GSIS disapproved their loan application. Phil‐ notarized the deed?
Ville advised them to seek other sources of
financing. In the meantime, they were allowed 0 None. The non‐appearance of the parties
to remain in the subject premises. Is there a before the notary public who notarized the deed
perfected and enforceable contract of sale or at does not necessarily nullify nor render the parties'
least an agreement to sell over the disputed transaction void ab initio. Article 1358, NCC on
housing units? the necessity of a public document is only for
convenience, not for validity or enforceability.
Where a contract is not in the form prescribed by
0 None. There was no contract of sale perfected
law, the parties can merely compel each other to
between the private parties over the said
observe that form, once the contract has been
property, there being no meeting of the minds as
perfected.
to terms, especially on the price thereof. At best,
only a proposed contract to sell obtained which
Note: Contracts are obligatory in whatever form
did not even ripen into a perfected contract due
they may have been entered into, provided all
at the first instance to private respondents'
essential requisites are present. (Penalosa v. Santos,
inability to secure approval of their GSIS housing G.R. No. 133749, Aug. 23, 2001)
loans. As it were, petitioners and private
respondents have not hurdled the negotiation
phase of a contract, which is the period from the
time the prospective contracting parties indicate
CIVIL LAW TEAM:
SALES
Q: When is an auction sale perfected? D. OBLIGATIONS CREATED
0 A sale by auction is perfected when the OBLIGATIONS OF THE BUYER

auctioneer announces its perfection by the fall of
the hammer, or in other customary manner. (Art. Q: What are the obligations of the buyer?
1476, par.2)
A:
0 Does the seller have the right to bid in an 0Payment of the price
auction sale? GR: Seller is not bound to deliver unless
the purchase price is paid
0 Yes. The seller has the right to bid provided XPN: A period of payment has been
that such right was reserved and notice was given fixed
to that effect. (Pineda, p. 53) 1Accept delivery of thing sold
2Pay for expenses of delivery
0 When is a sale of foreign exchange considered
perfected? Note: A grace period granted the buyer in case of
failure to pay is a right not an obligation. Non‐
0 A sale of foreign exchange is considered payment would still generally require judicial or
perfected from the moment the Bangko Sentral extrajudicial demand before default can arise.
ng Pilipinas authorizes the purchase, even if the
foreign bank has not yet honored the letter of Q: What are the other obligations of the buyer?
credit. (Pacific Oxygen and Acetylene Co. v.
Central Bank, G.R. No. L‐21881, Mar. 1, 1968) A:
0 To take care of the goods without the
0.0 CONSUMMATION obligation to return, where the goods
are delivered to the buyer and he
0 How does the consummation stage in a rightfully refuses to accept;
contract of sale take place?
Note: The goods in the buyer’s possession
0 It takes place by the delivery of the thing are at the seller’s risk.
together with the payment of the price.
1 To be liable as a depositary if he
5888 A and PDS Development Corp. executed a voluntarily constituted himself as such;
contract to sell a parcel of land. A died without 2 To pay interest for the period between
having completed the installment on the delivery of the thing and the payment of
property. His heirs then took over the contract the price in the following cases:
to sell and assumed his obligations by paying the 2.0 should it have been stipulated;
selling price of the lot from their own funds, and 2.1 should the thing sold and delivered
completed the payment. To whom should the produces fruits or income; or
final Deed of Absolute Sale be executed by PDS? 2.2 should he be in default, from the
time of judicial or extra‐judicial
0 Having stepped into the shoes of the deceased demand for the payment of the
with respect to the said contract, and being the price.
ones who continued to pay the installments from
their own funds, A’s heirs became the lawful OBLIGATIONS OF THE SELLER
owners of the said lot in whose favor the deed of
absolute sale should have been executed by 0 What are the obligations of the seller?
vendor PDS. (Dawson v. Register of Deeds of
Quezon City, G.R. No. 120600 Sept. 22, 1998) 0 DDTWTP
0 Deliver the thing sold;
1 Deliver fruits & accessions/accessories
accruing from perfection of sale;
2 Transfer the ownership;
3 Warranties;
4 Take care of the thing, pending delivery,
with proper diligence;
5 Pay for the expenses of the deed of sale
unless there is a stipulation to the
contrary
de
E. CHARACTERISTICS OF A CONTRACT OF SALE 2. Barter

SALE BARTER
Consideration is giving Consideration is
0 What are the characteristics of a contract of
of money as payment giving of a thing
sale?
If consideration consists party in money & partly by
thing–look at manifest intention;
A:
256 Consensual If intention is not clear – Art. 1468
257 Bilateral Value of thing is equal Value of thing is more
258 GR: Commutative or less than amount of than amount of money =
money = Sale Barter
Both are governed by law on sales
XPN: Aleatory – In some contracts of
sale, what one receives may in time be
greater or smaller than what he has
given. (Tolentino, p. 2, 2000 ed) 5888 Agency to Sell
259 Principal SALE AGENCY TO SELL
260 Title and not a mode of acquiring Agent not obliged to pay
ownership Buyer pays for price for price; must
261 Onerous of object account for the
262 Reciprocal proceeds of the sale.
263 Nominate Principal remains the
Buyer becomes owner even if the
0 Is a contract of sale identified as such based owner of thing object delivered to
agent
on the nomenclature given to the contract by
Agent assumes no personal
the parties?
Seller warrants liability as long as
within authority given
0 No. Contracts are not defined by the parties
Not unilaterally May be revoked
but by principles of law. To determine the nature unilaterally even w/o
of the contract, the courts are not bound by the revocable
ground
name or title given to it by the contracting parties.
Seller receives profit Agent not allowed to profit
It is the intention of the parties which controls.
Real contract Personal contract
(Diaz, Law on Sales as expounded by
Jurisprudence, 2006 ed., p.1)
0 Dacion en Pago
0 What are the factors to be considered in SALE DACION EN PAGO
determining the nature of the contract? No pre‐existing Contract where property is
0 credit alienated to extinguish pre‐
0 Language of the contract existing credit/debt
1 Conduct of parties Buyer‐seller Novates creditor‐debtor
relationship relationship into seller‐buyer
F. DISTINCTIONS OF THE CONTRACT OF SALE
WITH OTHER CONTRACTS 5. Lease
1 Distinguish Sale from the following: SALE LEASE
Use of thing is for

0 Donation. Obligation to absolutely
specified period only
transfer ownership of
with obligation to
SALE DONATION thing
return
Onerous Gratuitous/onerous Consideration is the
Consideration is the price
Consensual Formal contract rental
Law on Sales Law on Donation Seller needs to be owner of
thing to transfer
ownership.
Lessor need not be
Note: Lease with option to owner buy –
really a contract of sale but designated as
lease in name.
CIVIL LAW TEAM:
SALES
0 CONTRACT TO SELL document entitled "Receipt of Down Payment"

in favor of Alcaraz for the purchase of their
0 What is a contract to sell? house and lot, with the condition that Ramona
will make a down payment upon execution of
A: It is one form of conditional sale where the document. The Coronels would then cause
ownership or title is retained by the seller until the transfer of the property in the name of
the fulfillment of a positive suspensive condition, Ramona and will execute a deed of absolute sale
normally the payment of the purchase price by in favor of Ramona. Ramona paid the
the buyer in the manner agreed upon. (Gomez v. downpayment as agreed. Is there a perfected
CA, et. al., G.R. 120747, Sept. 21, 2000) contract of sale or a mere contract to sell?
5888 Distinguish a contract to sell from a 0 The agreement could not have been a contract
contract of sale. to sell because the sellers herein made no express
reservation of ownership or title to the subject
A: parcel of land. The Coronels had already agreed
CONTRACT OF SALE CONTRACT TO SELL to sell the house and lot they inherited from their
As regards transfer of ownership father, completely willing to transfer full
Ownership is transferred ownership of the subject house and lot to the
to the buyer upon Ownership is
buyer if the documents were then in order.
delivery of the object to transferred upon full
However, the TCT was then still in the name of
him. payment of the
their father, that is why they caused the issuance
Note: Vendor has lost purchase price.
and cannot recover Note: Prior to full
of a new TCT in their names upon receipt of the
ownership until and payment, ownership is down payment. As soon as the new TCT is issued
unless the contract is retained by the seller. in their names, they were committed to
resolved or rescinded immediately execute the deed of absolute sale.
As to numbers of contracts involved Only then will the obligation of the buyer to pay
There are two contracts: the remainder of the purchase price arise. This
1. The contract to sell suspensive condition was fulfilled. Thus, the
Note: Conditional or conditional contract of sale became obligatory,
the only act required for the consummation
There is only one preparatory sale thereof being the delivery of the property by
means of the execution of the deed of absolute
contract executed 2. The deed of absolute
sale in a public instrument, which they
between the seller and
sale unequivocally committed themselves to do as
the buyer.
evidenced by the "Receipt of Down Payment."
Note: The principal
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
contract is executed 1996)
after full payment of the
purchase price. 0Instead of executing a deed of Absolute Sale in
Payment asa condition favor of Ramona, the Coronels sold the property
Full payment of the to Catalina and unilaterally and extrajudicially
Non‐payment of the price is a positive rescinded the contract with Ramona. Ramona
price is a resolutory suspensive condition. then filed a complaint for specific performance.
condition. Vendor loses Note: Failure to fully
Will Ramona’s action prosper?
ownership over the pay the price is not a
property and cannot breach but an event
1024 Yes. Under Article 1187, the rights and
recover it until and that prevents the
obligations of the parties with respect to the
unless the contract is obligation of the vendor
perfected contract of sale became mutually due
resolved or rescinded. to convey title from
becoming effective.
and demandable as of the time of fulfillment or
occurrence of the suspensive condition. Hence,
Remediesavailable
petitioner‐sellers' act of unilaterally and
1. Specific
2. Performance 1. Resolution extrajudicially rescinding the contract of sale
3. Rescission 2. Damages cannot be justified, there being no express
4. Damages stipulation authorizing the sellers to
extrajudicially rescind the contract of sale.
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
0 Having agreed to sell property which they 1996)
inherited from their father, which was then still
in their father’s name, the Coronels executed a
de
DerechoCivil
237
Q: What are the instances when what is involved a. when a separation of property was
is a contract to sell? agreed upon in the marriage
settlements; or
A: b. when there has been a judicial
1. Where subject matter is indeterminate separation of property agreed
2. Sale of future goods upon between them
3. Stipulation that deed of sale &
corresponding certificate of sale would B. ABSOLUTE INCAPACITY
be issued only after full payment
Q: Who are those absolutely incapacitated to
II. PARTIES TO A CONTRACT OF SALE enter into a contract of sale?
Q: Who are the parties to a contract of sale? A:
A: 1. Unemancipated minors(Art. 1327, NCC);

2. Insane or demented persons, and deaf‐
1. Seller – one who sells and transfers the mutes who do not know how to write
thing and ownership to the buyer (Art. 1327, NCC)
2. Buyer – one who buys the thing upon
payment of the consideration agreed Q: May a capacitated person file an action for
upon annulment using as basis the incapacity of the
incapacitated party?
A. CAPACITY OF THE PARTIES
Q: Who may enter into a contract of sale? A: No. He is disqualified from alleging the
incapacity of the person whom he contracts (Art.
A: 1397, NCC);
GR : Any person who has capacity to contract Q: In a defective contract, where such defect
or enter into obligations, may enter into a consists in the incapacity of a party, does the
contract of sale, whether as party‐seller or as incapacitated party have an obligation to make
party‐buyer. restitution?
XPN : A:
1. Minors, insane and demented persons GR: he incapacitated person is not obliged to
and deaf‐mutes who do not know how make any restitution.
to write XPN: insofar as he has been benefited by the
2. Persons under a state of drunkenness thing or price received by him. (Art. 1399,
or during hypnotic spell NCC)
3. Husband and wife ‐ sale by and
between spouses C. RELATIVE INCAPACITY
Note: Contracts of sale entered by such legally Q: Who are those relatively incapacitated to
incapacitated persons are merely voidable,
enter into a contract of sale?
subject to annulment or ratification. However,
the action for annulment cannot be instituted A:
by the person who is capacitated since he is
disqualified from alleging the incapacity of the 1. Spouses (Art. 1490, NCC)
person with whom he contracts. 2. Agents, Guardians, Executors and
Administrators, Public Officers and
However, status of prohibited sales between Employees, Court Officers and
spouses is not merely voidable, but null and Employees, and others specially
void. disqualified by law. (Art. 1491, NCC)
XPN to XPN: Note: Under Art. 1490 of the NCC, spouses cannot
sell property to each other, except:

1. Where necessaries are sold and a. When a separation of property was
delivered to a minor or other person
without capacity to act, he must pay a b. agreed in the marriage settlements; or
reasonable price therefor. When there has been a judicial separation
2. In case of sale between spouses: of property agreed upon between them.
CIVIL LAW TEAM:
SALES
Q : What is the status of the following contracts XPN: Even when the property
of sale? regime prevailing was the conjugal
partnership of gains, the Supreme
A: Court held the sale by the husband
256 That entered into by minors: of a conjugal property without the
256.0 Merely voidable, subject to consent of the wife is void, not
annulment or ratification merely voidable under Art. 124 of
256.1 Action for annulment cannot be the Family Code since the resulting
instituted by the person who is contract lack one of the essential
capacitated since he is disqualified elements of full consent. (Guiang
from alleging the incapacity of the v. CA, G.R. No. 125172, June 26,
person with whom he contracts 1998)
(with partial restitution in so far as
the minor is benefited) where 5888 Between Common Law
necessaries are sold and delivered Spouses ‐ also null and void.
to a minor or other person without
capacity to act, he must pay a In Calimlim‐Canullas v. Fortun, the Court
reasonable price (Art. 1489) decided that sale between common law
spouses is null and void because Art.
257 Sale by & between spouses (Art. 1490): 1490 prohibits sales between spouses
257.0 Status of prohibited sales between to prevent the exercise of undue
spouses: influence by one spouse over the other,
GR: Null and void as well as to protect the institution of
marriage. The prohibition applies to a
XPN: In case of sale between couple living as husband and wife
spouses: without the benefit of marriage,
otherwise, the condition of those
0.0 When a separation of incurred guilt would turn out to be
property was agreed upon in better than those in legal union.
the marriage settlements; or (Calimlim‐Canullas v. Fortun, et. al., G.R.
0.1 When there has been a No. L‐57499, June 22, 1984)
judicial separation of property
agreed upon between them But when the registered property has
been conveyed subsequently to a third‐
Reasons: party buyer in good faith and for value,
0.0 Prevent defrauding creditors then reconveyance is no longer
0.1 Avoid situation where available to common‐law spouse‐seller,
dominant spouse takes since under the Torrens system every
advantage over the weaker buyer has a right to rely upon the title
spouse of his immediate seller. (Cruz v. CA, G.R.
0.2 Avoid circumvention on No. 120122, Nov. 6, 1997)
prohibition of donation
between spouses 0 Who has the right to assail the validity of the
transaction between spouses?
rd
0 Contract of sale with 3 parties:
GR: Under the law on sales, it 3 The following are the only persons who can
would seem that a spouse may, question the sale between spouses:
without the consent of the other ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀ
spouse, enter into sales ĀᜀĀᜀĀᜀĀ̀Ā0 The heirs of either of the
transactions in the regular or spouses who have been prejudiced;
normal pursuit of their profession, ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
vocation or trade. (in relation with Ā̀Ā1 Prior creditors; and
Art. 73, Family Code) ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀ̀Ā2 The State when it comes to
the payment of the proper taxes due on
the transactions
de 239
0 Who are the persons with relative incapacity to be the vendee in a contract of sale?
0 AGE‐COP
RELATIVELY PROPERTIES INVOLVED STATUS OF SALE RATIFICATION
INCAPACITATED TO BUY
Property entrusted to them for
administration or sale
Agents
XPN: When principal gave his Can be ratified after the
consent
inhibition has ceased
Property of the ward during
period of guardianship Reason: the only wrong that
Voidable subsists is the private wrong
G uardian Note: Contracts entered by to the ward, principal or
guardian in behalf of ward are estate; and can be condoned
rescissible if ward suffers lesion by the private parties
by more than ¼ of the value of themselves
property.
Executors and Property of the estate under

administrators administration
C ourt officers and Property and rights in litigation or Cannot be ratified
levied upon on execution before
employees
the court under their jurisdiction Void
Others specially Reason: It is a private wrong.
disqualified by law (Villanueva, Law on Sales, p.
Pubic officers and Property of the State entrusted to 30‐31)
employees them for administration
Note: Prohibitions are applicable to sales in legal redemption, compromises and renunciations.
In the case of Rubias v. Batiller (51 SCRA 120), it sought to declare the difference in the nullity between contracts
entered into by guardians, agents, administrators and executors, from the contracts entered into by judges, judicial
officers, fiscals and lawyers.
CIVIL LAW TEAM:
SALES
D. SPECIAL DISQUALIFICATIONS
0 Who are those persons specially disqualified

by law to enter into contracts of sale?
5888 ALIEN‐UnOS
5888 ALIENs who are disqualified to purchase
private agricultural lands (Art. XII Secs. 3
& 7)
5889 Unpaid seller having a right of lien or
having stopped the goods in transitu, is
prohibited from buying the goods either
directly or indirectly in the resale of the
same at public/private sale which he
may make (Art. 1533 [5]; Art. 1476 [4])
5890 The Officer holding the execution or
deputy cannot become a purchaser or
be interested directly or indirectly on
any purchase at an execution. (Sec. 21
Rule 39, Rules of Court)
5891 In Sale by auction, seller cannot bid
unless notice has been given that such
sale is subject to a right to bid in behalf
of the seller. (Art. 1476)
5889 Atty. Leon G. Maquera acquired his client’s

property as payment for his legal services, then
sold it and as a consequence obtained an
unreasonable high fee for handling his client’s
case. Did he validly acquire his client’s property?
0 No. Article 1491 (5) of the New Civil Code

prohibits lawyer’s acquisition by assignment of
the client’s property which is the subject of the
litigation handled by the lawyer. Also, under
Article 1492, the prohibition extends to sales in
legal redemption. (In Re: Suspension from the
Practice of Law in the territory of Guam of Atty.
Leon G. Maquera, B.M. No. 793, July 30, 2004)
de 241
0 SUBJECT MATTER OF SALE Note: Where land is sold for a lump sum and not so
much per unit of measure or number, the
A. REQUISITES OF A VALID SUBJECT MATTER boundaries of the land stated in the contract
determine the effects and scope of the sale, not the
area thereof. The vendors are obligated to deliver all
0 What are the requisites of a proper object of the land included within the boundaries, regardless
sale? of whether the real area should be greater or smaller
than that recited in the deed. This is particularly true
A: where the area is described as "humigit kumulang,"
0 Things that is, more or less. (Semira v. CA, G.R. No. 76031,
0 Determinate or determinable Mar. 2, 1994)
1 Lawful (licit), otherwise contract is
void Q: Can rights be the objects of sale?
2 Should not be impossible (within
the commerce of men) 0 Yes, if they are transmissible. (Art. 1347)
1 Rights
B. PARTICULAR KINDS
GR: Must be transmissible.
XPN: Q: What may be objects of sale?
0 Future inheritance
1 Service – cannot be the object of A:
sale. They are not determinate 0 Existing Goods – owned/ possessed by
things and no transfer of seller at the time of perfection
ownership is available but it can be
the object of certain contracts such 1 Future Goods – goods to be manufactured,
uas contract for a piece of work. raised, acquired by seller after
(Pineda, Sales, 2002 ed., p. 13) perfection of the contract or whose
acquisition by seller depends upon a
0.0 Rodriguez first purchased a portion of a contingency (Art. 1462)
Lot A consisting of 345 square meters located in
the middle of Lot B, which has a total area of 854 Note: Sale of future goods is valid only as an
executory contract to be fulfilled by the acquisition
square meters, from Juan. He then purchased
0 delivery of goods specified.
another portion of said lot. As shown in the
0 Sale of Undivided Interest or Share
receipt, the late Juan received P500.00 from
0 Sole owner may sell an undivided
Rodriguez as "advance payment for the
interest. (Art. 1463) Ex. A
residential lot adjoining his previously paid lot
fraction or percentage of such
on three sides excepting on the frontage. Juan’s
property
heirs now contests the validity of the
1 Sale of an undivided share in a
subsequent sale, alleging that the object is not
specific mass of fungible
determinate or determinable. Decide.
goods makes the buyer a co‐
owner of the entire mass in
0 Their contention is without merit. There is no
proportion to the amount he
dispute that Rodriguez purchased a portion of Lot
bought. (Art. 1464)
A consisting of 345 square meters. This portion is
2 A co‐owner cannot sell more
located in the middle of B, which has a total area
than his share (Yturralde v.
of 854 square meters, and is clearly what was
CA)
referred to in the receipt as the "previously paid
lot." Since the lot subsequently sold to Rodriguez
1 Sale of Things in Litigation
is said to adjoin the "previously paid lot" on three
0 Sale of things under litigation is
sides thereof, the subject lot is capable of being
rescissible if entered into by
determined without the need of any new
the defendant , without the
contract. The fact that the exact area of these
approval of the litigants or the
adjoining residential lots is subject to the result of
court (Art. 1381)
a survey does not detract from the fact that they
1 No rescission is allowed where
are determinate or determinable. Concomitantly,
the thing is legally in the
the object of the sale is certain and determinate. rd
(Heirs of San Andres v. Rodriguez, G.R. No. possession of a 3 person
135634, May 31, 2000)
CIVIL LAW TEAM:
SALES
Ȁ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀЀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀ0 No. Though she was not in
who did not acted in bad possession of the object of sale, Article 1459
faith. merely requires that the vendor must have
the right to transfer ownership of the object
0 Things subject to Resolutory Condition. sold at the time of delivery. In the case at bar,
Ex. Things acquired under legal or though Beth is not the owner, she had the
conventional right of redemption, or right to dispose of the prohibited drug.
subject to reserva troncal. (Art. 1465) Ownership was thereafter acquired upon her
delivery to the men in the alley after her
1 Indeterminate Quantity of Subject payment of the price. (People v. Ganguso,
Matter G.R. No. 115430, Nov. 23, 1995)
0 The fact that the quantity is
not determinate shall not be
an obstacle to the existence of
the contract provided it is
possible to determine the
same, without need of a new
contract. (Art. 1349)
IV. OBLIGATION OF THE SELLER

TO TRANSFER OWNERSHIP
0 Should the seller be the owner at the time of

perfection of the contract?
A:
GR: No. Seller must have the right to transfer
ownership at the time of delivery or
consummation stage. He need not be the
owner at the time of perfection of the
contract.
XPN: Foreclosure sale wherein the mortgagor

should be the absolute owner.
̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀЀĀȀĀ⸀ĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀĀĀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀
ĀȀ㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ
㨀ĀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ
㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀ̀ĀĀĀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀĀĀĀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀऀ̀ ऀ̀ĀȀ⸀ĀĀȀĀ⸀ĀЀĀȀȀ⸀Ā
ᜀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀ⌀̀ĀȀ⸀ĀĀȀĀ⸀ĀЀĀȀȀ⸀ĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀᜀȀĀȀ⸀ĀЀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
Āᜀ̀ ĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀĀĀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ
㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀ̀ĀĀĀ̀ĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀
Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀЀĀȀĀ⸀ĀᜀĀⴀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā̀ĀĀĀĀ̀ĀĀȀĀᜀĀᜀ0 EJ
was subjected to a buy‐bust operation where
police officers posed to buy 500 pesos worth of
“S”. She was then charged with a violation of the
Dangerous Drugs Act for trafficking drugs. EJ uses
as defense her lack of possession of the object of
the sale. Would her contention free her from
liability?
(Mindanao‐Academy, Inc. v. Yap,
G.R. No. L‐17681, Feb. 26, 1965)
A. SALE BY A PERSON WHO DOES NOT OWN THE 5889 New view – the sale by a non‐
THING SOLD owner of the subject property is
void instead of treating the
0 What is the status of a sale by a person who does tradition/delivery aspect as having
not own the thing subject of the sale? no effect on transferring ownership
to the buyer. (DBP v. CA, G.R. No.
0 It depends upon the stage of the sale. 110053, Oct. 16, 1995)
0 When seller is not owner at perfection
stage – the sale is valid. Note: Nemo dat quod non habet – you
Ownership of the subject matter by the cannot give what you do not have, properly
seller at this stage is not an essential applicable to the consummation of a sale.
requirement for the validity of sale. It is
necessary at the time of delivery. Hence, a 0 What is the legal effect of sale by a non‐
valid contract of sale can cover subject owner?
matter that is not yet existing or even a
thing having only a potential existence at A:
the time of perfection; or even a thing GR: The buyer requires no better title to the
subject to a resolutory condition. goods than the seller had; caveat emptor
(buyer beware).
Note: If the seller later acquires title thereto
and delivers it, title passes by operation of law. XPN:
0 Estoppel – when the owner of the goods is
0 When seller is not owner at consummation by his conduct precluded from denying
stage the seller’s authority to sell
5888 Old view – the contract of sale is 1 When the contrary is provided for in
valid, but the transfer of title is void. recording laws
de 243
3. When the sale is made under statutory existence as long as

power of sale or under the order of a the hope itself validly
court of competent jurisdiction existed. (eg. lotto)
4. When the sale is made in a merchant’s Note: The presumption is Emptio Rei Speratae
store in accordance with the Code of Q: Jose, as co‐owner, sold the entire land in
Commerce and special laws
5. When a person who is not the owner favor of his minor daughter, Ida. Alleging that
sells and delivers a thing, and Jose had fraudulently registered it in his name
subsequently acquired title thereto alone, his sisters, sued him for recovery of 2/3
6. When the seller has a voidable title share of the property. Ida did not pay for the
which has not been avoided at the time land. Is the sale valid?
of the sale A: No. Jose did not have the right to transfer
7. Sale by co‐owner of the whole property
or a definite portion thereof ownership of the entire property to petitioner
8. Special rights of unpaid seller since 2/3 thereof belonged to his sisters. Also, Ida
could not have given her consent to the contract,
Q: What are the instances when the Civil Code being a minor at the time. Consent of the
recognizes sale of things not actually or already contracting parties is among the essential
owned by the seller at the time of sale? requisites of a contract, including one of sale,
absent which there can be no valid contract.
A: Moreover, Ida admittedly did not pay any centavo
1. Sale of a thing having potential for the property, which makes the sale void.
existence (Art.1461, NCC) Article 1471 of the Civil Code provides: If the price
2. Sale of future goods (Art. 1462, NCC) is simulated, the sale is void, but the act may be
3. Contract for the delivery at a certain shown to have been in reality a donation, or
price of an article, which the seller in some other act or contract. (Labagala v. Santiago,
the ordinary course of business G.R. No. 132305, Dec. 4, 2001)
manufactures/ procures for the general
market, whether the same is on hand at
the time or not (Art. 1467, NCC) V. PRICE
B. SALE BY A PERON HAVING A VOIDABLE TITLE A. MEANING OF PRICE

Q: What is the effect of a sale made by the seller Q: What is a price?
with voidable title over the object?

A: Price signifies the sum stipulated as the
A: equivalent of the thing sold and also every
1. Perfection stage: valid – buyer acquires incident taken into consideration for the fixing of
title of goods the price put to the debit of the buyer and agreed
2. Consummation stage: valid – If the title to by him. (Villanueva, p. 52)
has not yet been avoided at the time of
sale and the buyer must buy the goods B. REQUISITES FOR A VALID PRICE
under the following conditions:
a. In good faith Q: What are the requisites of price?
b. For value
c. Without notice of seller’s defect of A: Must be:
title 1. Real
2. In money or its equivalent
EMPTIO REI SPERATAE EMPTIO SPEI 3. Certain or ascertainable at the time of
Sale of thing having Sale of mere hope or the perfection of the contract
potential existence expectancy
Uncertainty is w/ regard Uncertainty is w/ regard C. HOW PRICE IS DETERMINED
to quantity & quality to existence of thing
Contract deals w/ future Contract deals w/ Q: When is price certain?
present thing – hope
thing
or expectancy A:
Sale is valid only if the Sale is valid even though 1. If there is a stipulation
expected thing will expected thing does 2. If it be with reference to another thing
exist. not come into certain
CIVIL LAW TEAM:
SALES
3. If the determination of the price is left Q: What is the effect on the contract of sale in
to the judgment of specified person(s) case of a breach in the agreed manner of
4. By reference to certain fact(s) as payment?
referred to in Art. 1472 (Art. 1469)
Note: If the price is based on estimates, it is A: None. It is not the act of payment of price that
determines the validity of a contract of sale.
uncertain. Payment of the price has nothing to do with the
perfection of the contract, as it goes into the
D. GROSS INADEQUACY OF THE PRICE performance of the contract. Failure to pay the
Q: What is the effect of gross inadequacy of consideration is different from lack of
consideration. Failure to pay such results in a
price? right to demand the fulfillment or cancellation of
A: the obligation under an existing valid contract. On
the other hand, lack of consideration prevents the
GR : It does not affect the validity of the sale if existence of a valid contract. (Sps. Bernardo
it is fixed in good faith and without fraud Buenaventura and Consolacion Joaqui v. CA, GR
XPN: CoRDS No. 126376, Nov. 20, 2003)
1. If Co nsent is vitiated (may be annulled Q: Is payment of the purchase price essential to

or presumed to be equitable mortgage) transfer ownership?
2. If the parties intended a Donation or
some other act/ contract A: Unless the contract contains a stipulation that
3. If the price is so low as to be “ S hocking ownership of the thing sold shall not pass to the
to the conscience” purchaser until he has fully paid the price,
4. If in the event of R esale, a better price ownership of the thing sold shall be transferred to
can be obtained the vendee upon the actual or constructive
Note: delivery thereof. (Diaz, p. 48)
GR: The validity of the sale is not necessarily affected
E. WHEN NO PRICE IS AGREED UPON BY THE
where the law gives the owner the right to redeem
PARTIES
because the lesser the price, the easier it is for the
owner to effect redemption. Q: What is the effect of failure to determine the
XPN: While there is no dispute that mere inadequacy price?
of the price per se will not set aside a judicial sale of A:
real property, nevertheless, where the inadequacy of
the price is purely shocking to the conscience, such 1. Where contract is executory –
that the mind revolts at it and such that a reasonable ineffective
man would neither directly or indirectly be likely to 2. Where the thing has been delivered to
consent to it, the same will be set aside. (Cometa v. and appropriated by the buyer – the
CA 351 SCRA 294) buyer must pay a reasonable price
therefore
Q: What is the effect if the price is simulated? Note: The fixing of the price cannot be left to the
A: discretion of one of the parties. However, if the price

GR: Contract of sale is void. fixed by one of the parties is accepted by the other,
XPN: The act may be shown to have been in the sale is perfected.
reality a donation or some other act or

contract.
Q: What is considered reasonable price?
A: Generally the market price at the time and
place fixed by the contract or by law for the

delivery of the goods.
de 245
F. MANNER OF PAYMENT 5888Distinguish the failure to pay the

consideration from lack of consideration.
0What is the effect of a breach of the agreed
manner of payment to the contract of sale? A:
FAILURE TO PAY LACK OF
0 None. A contract of sale being a consensual CONSIDERATION CONSIDERATION
contract, it becomes binding and valid upon the As to validity of contract of sale
meeting of the minds as to price. It is not the act of payment
0 If there is such meeting of the minds as of price that determines
to price, the contract of sale is valid, the validity of a contract of
despite the manner of payment, or even sale. Lack of consideration
the breach of that manner of payment. Note: Payment of the price prevents the
existence of a valid
has nothing to do with the
1 If the real price is not stated in the contract.
perfection of the contract.
contract, then the contract of sale is
Instead, it goes into the
valid but subject to reformation.
performance of the
2 If there is no meeting of the minds as to contract.
the price because the price stipulated in
As to resultant right
the contract is simulated, then the
Failure to pay the
contract is void, in accordance with consideration results in a The contract of sale is
Article 1471 of the Civil Code. (Sps. right to demand the null and void and
Buenaventura v. CA, G.R. No. 126376, fulfillment or cancellation produces no effect
Nov. 20, 2003) of the obligation under an whatsoever
existing valid contract.
Note: A definite agreement on the manner of
payment of the price is an essential element in the 23EARNEST MONEY VIS‐A‐VIS OPTION MONEYY
formation of a binding and enforceable contract of
sale. (Co v. CA, G.R. No. 123908, Feb. 9, 1998)
OPTION MONEY
0 In an action for specific performance with
23 What is the effect of failure to determine the
damages, X alleged that there was an agreement
price?
to purchase the lot of Y. As regards the manner
of payment, however, Y’s receipts contradicted
A:
the testimony of X. The receipts failed to state
5888 Where contract is executory –
the total purchase price or prove that full
ineffective
payment was made. For this reason, it was
5889 Where the thing has been
contended that there was no meeting of their
delivered to and appropriated by the
minds and there was no perfected contract of
buyer – the buyer must pay a
sale. Decide.
reasonable price therefore
0 The question to be determined should not be
Note: The fixing of the price cannot be left to the
whether there was an agreed price, but what that discretion of one of the parties. However, if the price
agreed price was. The sellers could not render fixed by one of the parties is accepted by the other,
invalid a perfected contract of sale by merely the sale is perfected.
contradicting the buyer’s obligation regarding the
price, and subsequently raising the lack of Q: What is an option money?
agreement as to the price. (David v. Tiongson,
G.R. No. 108169, Aug. 25, 1999) 0 The distinct consideration in case of an option
contract. It does not form part of the purchase
price hence, it cannot be recovered if the buyer
did not continue with the sale.
0 When is payment considered option money?
5888 Payment is considered option money

when it is given as a separate and distinct
consideration from the purchase price.
Consideration in an option contract may be
anything or undertaking of value.
CIVIL LAW TEAM:
SALES
EARNEST MONEY Simeon suddenly has a change of heart, claiming

that the deal is disadvantageous to him as he
Q: What is an earnest money or “arras”? has found out that the property can fetch three
times the agreed purchase price. Bert seeks
A: This is the money given to the seller by the specific performance but Simeon contends that
prospective buyer to show that the latter is truly he has merely given Bert an option to buy and
interested in buying the property, and its aim is to nothing more and offers to return the option
bind the bargain. (Pineda, p. 75) money which Bert refuses to accept.
Q: What is the effect of giving an earnest 1. Will Bert's action for specific
money? performance prosper? Explain.

2. May Simeon justify his refusal to
A: It forms part of the purchase price which may proceed with the sale by the fact that
be deducted from the total price. It also serves as the deal is financially disadvantageous
a proof of the perfection of the contract of sale. to him? Explain.
The rule is no more than a disputable
presumption and prevails only in the absence of A:
contrary or rebuttable evidence. (PNB v CA, 262 1. Bert's action for specific performance
SCRA 464, 1996) will prosper because there was a
binding agreement of sale, not just an
Note: Option money may become earnest money if option contract. The sale was perfected
the parties so agree. upon acceptance by Simeon of 10% of
Q: When is payment considered an earnest the agreed price. This amount is in
reality an earnest money which, under
money? Art. 1482, "shall be considered as part
A: When the payment constitutes as part of the of the price and as proof of the
perfection of the contract." (Topacio v.
purchase price. Hence, in case when the sale did CA, G.R. No. 102606, July 3, 1992;
not happen, it must be returned to the Villongco Realty v. Bormaheco, G.R. No.
prospective buyer. L‐26872, July 25, 1975).
Q: Distinguish option money from earnest 2. Simeon cannot justify his refusal to
money. proceed with the sale by the fact that

A: the deal is financially disadvantageous
to him. Having made a bad bargain is
OPTION MONEY EARNEST MONEY not a legal ground for pulling out of a
Money given as Forms part of the binding contract of sale, in the absence
distinct of some actionable wrong by the other
consideration for purchase price party (Vales v. Villa, G.R. No. 10028,
an option contract Dec. 16, 1916), and no such wrong has
Applies to a sale Given only when there is been committed by Bert. (2002 Bar
not yet perfected already a sale Question)
Prospective buyer is When given, the buyer is
not required to bound to pay the
VI. FORMATION OF CONTRACT OF SALE
buy. balance.
If buyer does not If sale did not materialize, Note: see Introduction, Stages of Contract of Sale
decide to buy, it it must be returned. pp. 230‐234
cannot be (Villanueva, p. 87,
recovered. Pineda, p.77)
0 Bert offers to buy Simeon's property under

the following terms and conditions: P1 million
purchase price, 10% option money, the balance
payable in cash upon the clearance of the
property of all illegal occupants. The option
money is promptly paid and Simeon clears the
property of all illegal occupants in no time at all.
However, when Bert tenders payment of the
balance and asks for the deed of absolute sale,
de
DerechoCivil 247
VII. TRANSFER OF OWNERSHIP this case, the subject motor vehicle) the thing
sold remained at the seller’s risk. The Union
A. MANNER OF TRANSFER Motor should therefore bear the loss of the
subject motor vehicle after its agent allegedly
Q: What is the effect of delivery? stole the same. (Union Motor Corp. v. CA, G.R.
No. 117187, July 20, 2001)
A:
GR: Title /ownership is transferred 0 How may the buyer accept the delivery of the
thing sold?
XPN: Contrary is stipulated as in the case of:
0 Pactum reservatii in domini – agreement A:
that ownership will remain with seller 0 Express – he intimates to seller that he has
until full payment of price (Contract to accepted
sell); 1 Implied
1 Sale on acceptance/approval; 0 Buyer does not act inconsistent
2 Sale on return; with ownership of seller after
3 There is implied reservation of ownership; delivery
1 Retains without intimating to seller
Note: Seller bears expenses of delivery. that he has rejected
0 Spouses Bernal purchased a jeepney from 0.0 What is the effect if the buyer refuses to
Union Motor to be paid in installments. They accept despite delivery of the object of the sale?
then executed a promissory note and a deed of
chattel mortgage in favor of Union Motor which 0 Delivery is completed. Since delivery of the
in turn assigned the same with Jardine Finance. subject matter of the sale is an obligation on the
To effectuate the sale as well as the assignment part of the seller, the acceptance thereof by the
of the promissory note and chattel mortgage, buyer is not a condition for the completeness of
the spouses were required to sign documents, the delivery. (Villanueva, p. 117)
one of which was a sales invoice. Although the
Spouses have not yet physically possessed the Note: Thus, even with such refusal of acceptance,
vehicle, Union Motor’s agent required them to delivery (actual/constructive), will produce its legal
sign the receipt as a condition for the delivery of effects. (e.g. transferring the risk of loss of the
the vehicle. It was discovered that the said agent subject matter to the buyer who has become the
stole the vehicle even prior to its delivery to the owner thereof) (Villanueva, p. 117)
spouses. Was there a transfer of ownership of
the subject vehicle? Under Art. 1588, when the buyer’s refusal to accept
the goods is without just cause, the title thereto
passes to him from the moment they are placed at
0 No. The issuance of a sales invoice does not his disposal. (Villanueva, p. 117)
prove transfer of ownership of the thing sold to
the buyer; an invoice is nothing more than a
0 Is payment of the purchase price essential to
detailed statement of the nature, quantity and
transfer ownership?
cost of the thing sold and has been considered
not a bill of sale.
0 Unless the contract contains a stipulation that
ownership of the thing sold shall not pass to the
The registration certificate signed by the spouses
purchaser until he has fully paid the price,
does not conclusively prove that constructive
ownership of the thing sold shall be transferred to
delivery was made nor that ownership has been
the vendee upon the actual or constructive
transferred to the respondent spouses. Like the
delivery thereof. (Diaz, p. 48)
receipt and the invoice, the signing of the said
documents was qualified by the fact that it was a
0 What are the effects of a sale of goods on
requirement of Union Motor for the sale and
installment?
financing contract to be approved. In all forms of
delivery, it is necessary that the act of delivery,
A:
whether constructive or actual, should be coupled
0 Goods must be delivered in full except
with the intention of delivering the thing. The act,
when stipulated
without the intention, is insufficient. Inasmuch as
there was neither physical nor constructive
delivery of a determinate thing, (in
CIVIL LAW TEAM:
SALES
0 When not examined by the buyer – it is not c. when the seller of the
accepted until examined or at least had goods draws on the buyer for
reasonable time to examine the price and transmits the
bill of exchange and the bill of
5888 When may the buyer suspend payment of lading to the buyer , and the
the price? latter does not honor the bill
of exchange by returning the
A: bill of lading to the seller
GR: 0 When sale is not VALID
5888 If he is disturbed in the possession 1 When the seller is not the owner of the
or ownership of the thing bought goods
5889 If he has well‐grounded fear that XPNs:
his possession or ownership would be 5888 Estoppel: when the
disturbed by a vindicatory action or owner is precluded from
foreclosure of mortgage. denying the sellers authority
to sell
Note: These grounds are not exclusive. It can 5889 Registered land
only be exercised if the price or any part bought in good faith: Ratio:
thereof has not yet been paid and the contract Buyer need not go beyond the
is not yet consummated. (Art. 1590) If the Torrens title
disturbance is caused by the existence of non‐ 5890 Order of Courts in a
apparent servitude, the remedy is rescission. Statutory Sale
5891 When the goods are
XPN: purchased in a Merchant’s
0.0 Seller gives security for the return of the store, Fair or Market (Art.
price in a proper case; 1505)
0.1 A stipulation that notwithstanding any
such contingency, the buyer must make SALE ON TRIAL, APPROVAL OR SATISFACTION
payment;
0.2 Disturbance or danger is caused by the Q: What is sale on trial, approval or satisfaction?
seller;
0.3 If the disturbance is a mere act of 0 It is a contract in the nature of an option to
trespass; purchase if the goods prove to be satisfactory, the
0.4 Upon full payment of the price. approval of the buyer being a condition
precedent.
B. WHEN DELIVERY DOES NOT TRANSFER TITLE 0 What are the rules in case of sale on trial,
approval or satisfaction?
0 When does delivery does not transfer title?
A:
A:
0 Sale on Trial, Approval, or Satisfaction Title Remains with seller
1 When there is an EXPRESS RESERVATION GR: Borne by seller
If it was stipulated that XPN:
ownership shall not pass to Risk of Loss 1. Buyer is at fault
the purchaser until he has 2. Buyer agreed to
fully paid the price (Art. 1478) bear the loss
2 When there is an IMPLIED RESERVATION GR: Buyer must give goods a
0 When goods are shipped, trial
but the bill of lading states As to trial XPN: Buyer need not do so if
that goods are deliverable to it is evident that it cannot
the seller or his agent, or to perform the work.
the order of the seller or his
When period It runs only when all the parts
agent
1 When the bill of lading is within which buyer
essential for the operation of
must signify his
retained by the seller or his the object has been delivered
acceptance runs
agent
de
Validity of 0.256 Allowing buyer to make use of

stipulation that a Valid, provided the 3 rd person rights
3rd person must 0 Tradition by operation of law –
satisfy approval or is in good fath Execution of a public instrument is
satisfaction equivalent to delivery. But to be
If the sale is made effective, it is necessary that the seller
to a buyer who is Generally, it cannot be have such control over the thing sold
an expert on the considered a sale on approval that, at the moment of sale, its material
object purchased delivery could have been made.
C. KINDS OF DELIVERY GR: There is presumption of delivery
Q: What are the different kinds of delivery? XPN:

0 Contrary stipulation;
A: 1 When at the time of execution,
0 Actual – thing sold is placed under the subject matter was not subject to
control and possession of buyer/agent; the control of seller;
1 Constructive – does not confer physical 2 Seller has no capacity to deliver at
possession of the thing, but by time of execution;
construction of law, is equivalent to acts 3 Such capacity should subsist for a
of real delivery. reasonable time after execution of
instrument.
Requisites:
0 The seller must have control over Note: Delivery should be coupled with intention of
the thing delivering the thing, and acceptance on the part of
1 The buyer must be put under the buyer to give legal effect of the act. Without such
control intention, there is no such tradition.
2 There must be intention to deliver
the thing for purposes of 0 Susan invested in commodity futures
ownership trading in OCP, which involves the buying or
selling of a specified quantity and grade of a
0 Tradicion Symbolica – delivery commodity at a future date at a price
of certain symbols established at the floor of the exchange. As per
representing the thing terms of the trading contract, customer's orders
1 Tradicion Instrumental – shall be directly transmitted by OCP as broker to
delivery of the instrument of its principal, Frankwell Enterprises, which in turn
conveyance. must place the customer's orders with the Tokyo
2 Traditio Longa Manu – Exchange. In this case, however, there is no
Delivery of thing by mere evidence of such transmission. When Susan
agreement; when seller points withdrew her investment, she was not able to
to the property without need recover the entire amount. She thus filed a
of actually delivering complaint and the trial court ruled in her favor,
3 Tradicion Brevi Manu – Before saying that the contract is a species of gambling
contract of sale, the would‐be and therefore void. Is the court’s ruling correct?
buyer was already in
possession of the would‐be 0 Yes. A trading contract is a contract for the sale
subject matter of sale of products for future delivery, in which either
4 Constitutum Possessorium – at seller or buyer may elect to make or demand
the time of perfection of delivery of goods agreed to be bought and sold,
contract, seller continues to but where no such delivery is actually made. In
have possession merely as a this case, no actual delivery of goods and
holder commodity was intended and ever made by the
parties. In the realities of the transaction, the
3. Quasi‐tradition – delivery of rights, parties merely speculated on the rise and fall in
credits or incorporeal property, made the price of the goods/commodity subject matter
by: of the transaction. If Susan’s speculation was
0Placing titles of ownership in the correct, she would be the winner and OCP, the
hands of the buyer; loser, so OCP would have to pay her the "margin".
CIVIL LAW TEAM:
SALES
But if she was wrong in her speculation then she 23 FOB (Free On Board) – when goods are
would emerge as the loser and OCP, the winner. delivered at the point of shipment,
OCP would then keep the money or collect the delivery to carrier by placing the goods
difference from her. This is clearly a form of on vessel is delivery to buyer
gambling provided for with unmistakable 24 CIF (Cost, Insurance, Freight) –
certainty under Article 2018. (Onapal Phils. 23 When buyer pays for services of
Commodities, Inc. vs. CA and Susan Chua, G.R. No. carrier, delivery to carrier is
90707, Feb. 1, 1993) delivery to buyer, carrier as agent
of buyer;
Note: Futures Commission Merchant/Broker refers 24 When buyer pays seller the price –
to a corporation or partnership, which must be from the moment the vessel is at
registered and licensed as a Futures Commission the port of destination, there is
Merchant/Broker and is engaged in soliciting or in already delivery to buyer
accepting orders for the purchase or sale of any 25 COD (Collect On Delivery) – the carrier
commodity for future delivery on or subject to the acts for the seller in collecting the
rules of the contract market and that, in connection
purchase price, which the buyer must
with such solicitation or acceptance of orders,
pay to obtain possession of the goods.
accepts any money, securities or property (or
extends credit in lieu thereof) to margin, guarantee
or secure any trade or contract that results or may 23 What are the seller’s duties after delivery to
result therefrom. the carrier?
0 Given that actual possession, control and A:

enjoyment is a main attribute of ownership, is 23 To enter on behalf of the buyer into
symbolic delivery by mere execution of the deed such contract reasonable under the
of conveyance sufficient to convey ownership circumstances;
over property? 24 To give notice to the buyer regarding
necessity of insuring the goods.
23 Yes, possession is also transferred along with
ownership thereof by virtue of the deed of 23 Where is the place of delivery?
conveyance. The mere execution of the deed of
conveyance in a public document is equivalent to A:
the delivery of the property, prior physical 512.0 That agreed upon
delivery or possession is not legally required. The 512.1 Place determined by usage of trade
deed operates as a formal or symbolic delivery of 512.2 Seller’s place of business
the property sold and authorizes the buyer or 512.3 Seller’s residence
transferee to use the document as proof of 512.4 In case of specific goods, where they
ownership. Nothing more is required. (Sps. Sabio can be found
v. International Corporate Bank, Inc. et. at. G.R.
No. 132709, Sept. 4, 2001) 0 When should the object be delivered?
5888 Can delivery be effected through a carrier? A:

0 Stipulated time
A: 1 If there is none, at a reasonable hour.
GR: Yes, if the seller is authorized. Delivery to
carrier is delivery to the buyer. 0 What are the effects of a sale of goods on
installment?
XPN:
0.0 A contrary intention appears A:
0.1 Implied reservation of ownership under ĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀ
Art. 1503, pars 1, 2, 3. ĀᜀĀᜀĀᜀĀᜀᄀ0 Goods must be
delivered in full except when stipulated
0 What are the kinds of delivery to carrier? ĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀᜀᄀ1 When not examined
A: by the buyer – it is not accepted until
0 FAS (Free Along Side) – when goods are examined or at least had reasonable
delivered alongside the ship, there is time to examine
already delivery to the buyer
de 251
0 When is the seller not bound to deliver the property had not been delivered to Ten Forty;
thing sold? hence, it did not acquire possession either
materially or symbolically. As between the two
A: buyers, therefore, respondent was first in actual
0 If the buyer has not paid the price; possession of the property. (Ten Forty Realty &
1 No period for payment has been fixed in Dev’t. Corp. v. Cruz, G.R. No. 151212, Sept. 10,
the contract; 2003)
2 A period for payment has been fixed in
the contract but the buyer has lost the 0 Explain the principle of prius tempore, potior
right to make use of the time. jure.
2.0 DOUBLE SALE 0 Knowledge by the first buyer of the second sale
cannot defeat the first buyer’s rights except when
0 When is there a double sale? the second buyer first registers in good faith the
second sale. Conversely, knowledge gained by the
23 There is double sale when the same object of second buyer of the first sale defeats his rights
the sale is sold to different vendees. even if he is first to register, since such knowledge
taints his registration with bad faith to merit the
nd
Note: Requisites: protection of Art. 1544 (2 par.), the second
3 Same subject matter realty buyer must act in good faith in registering
4 Same immediate seller his deed of sale. (Diaz, p. 125)
5 Two or more different buyers
6 Both sales are valid Note: Where one sale is absolute and the other is a
pacto de retro transaction where the period to
5888 What is the rule on double sale? redeem has not yet expired, Art. 1544 will not apply.
(Pineda, p. 223)
0 First in time, priority in right
0 Juliet offered to sell her house and lot,
Note: Rule on Double Sale regarding immovables: together with all the furniture and appliances
GR: Apply Art.1544 therein, to Dehlma. Before agreeing to purchase
XPN: Sale of registered lands – apply Torrens the property, Dehlma went to the Register of
System Deeds to verify Juliet’s title. She discovered that
while the property was registered in Juliet’s
0 What are the rules according to Article 1544 name under the Land Registration Act, as
of the Civil Code? amended by the Property Registration Decree, it
was mortgaged to Elaine to secure a debt of P80,
A: 000. Wanting to buy the property, Dehlma told
0 Movable – Owner who is first to possess Juliet to redeem the property from Elaine, and
in good faith gave her an advance payment to be used for
1 Immovable – purposes of releasing the mortgage on the
0 First to register in good faith property. When the mortgage was released,
1 No inscription, first to possess in Juliet executed a Deed of Absolute Sale over the
good faith property which was duly registered with the
2 No inscription & no possession in Registry of Deeds, and a new TCT was issued in
good faith – Person who presents Dehlma’s name. Dehlma immediately took
oldest title in good faith possession over the house and lot and the
movables therein. Thereafter, Dehlma went to
1 PROPERTY REGISTRATION DECREE the Assessor’s Office to get a new tax declaration
under her name. She was surprised to find out
0 Ten Forty Realty purchased from Galino a that the property was already declared for tax
parcel of land. However, the Deed of Sale was purposes in the name of XYZ Bank which had
not recorded in the Registry of Deeds. foreclosed the mortgage on the property before
Subsequently, Galino sold the same property to it was sold to her. XYZ Bank was also the
Cruz who immediately took possession of the purchaser in the foreclosure sale of the property.
said property. Who has a better right between At that time, the property was still unregistered
Ten Forty and Cruz? but XYZ Bank registered the Sheriff’s Deed of
0 In the absence of the required registration, the Conveyance in the day book of the Register of
law gives preferential right to the buyer who in Deeds under Act 3344 and obtained a tax
good faith is first in possession. The subject declaration in its name.
CIVIL LAW TEAM:
SALES
Was Dehlma a purchaser in good faith? Knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register
23 Yes, Dehlma is a purchaser in good faith. She the second sale, since such knowledge taints his
learned about the XYZ tax declaration and prior registration with bad faith (Art. 1544)
foreclosure sale only after the sale to her was (Uraca, et. al v. CA, G.R. No. 115158, Sept. 5,
registered. She relied on the certificate of title of 1997)
her predecessor‐in‐interest. Under the Torrens
System, a buyer of registered lands is not VIII. RISK OF LOSS
required by law to inquire further than what the
Torrens certificate indicates on its face. If a Q: When is a thing considered lost?
person proceeds to but it relying on the title, that
person is considered a buyer in good faith. 5888 It is understood that the thing is lost when it:
5888 perishes, or
The “priority in time” rule could not be invoked by 5889 goes out of commerce, or
XYZ Bank because the foreclosure sale of the land 5890 disappears in such a way that
in favour of the bank was recorded under Act its existence is unknown or cannot be
nd
3344, the law governing transactions affecting recovered. (Art. 1189, 2 par.)
unregistered land, and thus, does not bind the
land. 0 What is deterioration?
23 Who as between Dehlma and XYZ Bank has a 0 Deterioration is the lowering of the value or
better right to the house and lot? character of a thing. It normally occurs by reason
of ordinary wear and tear. (Pineda, Credit, p. 20)
0 Between Dehlma and the bank, the former has
a better right to the house and lot. 0 Who bears the risk of loss or deterioration?
0 Who owns the movables inside the house? 0

BEFORE Res perit domino – Seller is the
0 Unless there is a contrary stipulation in the
absolute deed of sale, Dehlma owns the movables owner so seller bears risk of loss
PERFECTION
covered by the Deed of Sale and her ownership is
perfected by the execution and delivery of public
document of sale. The delivery of the absolute Res perit domino
deed of sale is a symbolical delivery of the house AT Contract shall be without any
and lot, including the contents of the house. This
is an obligation to deliver a specific thing, which PERFECTION effect – the seller bears the loss
includes the delivery of the specific thing itself since the buyer is relieved of his
and all of its accessions and accessories even obligation under the contract
though they may not have been mentioned (Art. Two Views:
1166, CC). (2008 Bar Question) Paras: Buyer, except:
1. when object sold consists of
fungible goods for a price fixed
23 Does prior registration by the second buyer of
AFTER 2. when seller is guilty of fraud,
a property subject of a double sale confer PERFECTION negligence, default, or
ownership or preferred right in his favor over BUT violation of contractual terms;
that of the first buyer? BEFORE or
DELIVERY 3. when object sold is generic.
23 Prior registration of the disputed property by Tolentino: Seller;
the second buyer does not by itself confer
ownership or a better right over the property. Deterioration & fruits – Buyer
Article 1544 requires that such registration must bears loss
be coupled with good faith. Res perit domino
Buyer becomes the owner so
Knowledge gained by the first buyer of the second
sale cannot defeat the first buyer's rights except AFTER buyer bears risk of loss
where the second buyer registers in good faith DELIVERY
the second sale ahead of the first, as provided by Delivery extinguish ownership vis‐
the Civil Code. a‐vis the seller & creates a new
one in favor of the buyer
de 253
0 What is the effect of the loss of the thing

subject of the contract at the time of sale? 0 Who may negotiate a Negotiable Document
of Title?
A:
0 Total loss – contract is void & inexistent A:
1 Partial loss – buyer may elect between 256 Owner
withdrawing from the contract or 257 Person to whom the possession pr
demanding the remaining part, paying custody of the document has been
its proportionate price entrusted by the owner
0 If bailee undertakes to
1.0 When Ownership is deliver the goods to such
Transferred person
1 If document is in such
See Transfer of Ownership. p. 247 form that it may be
negotiated by delivery.
IX. DOCUMENTS OF TITLE Non‐Negotiable Documents of Title
Q: What is a Document of Title? Q: What are Non‐negotiable documents of title?
0 A document used in the ordinary course of A:

business in the sale or transfer of goods , as proof 0 They are delivered only to a
of the possession or control of the goods , or specified person
authorizing or purporting to authorize the 1 Carrier will not deliver the goods to
possessor of the document to transfer or receive , any holder of the document or to
either by endorsement or by delivery , goods whom such document may have
represented by such document (Art. 1636). been endorsed by the consignee
2 Must present the deed of sale or
0 What is the purpose of the Documents of Title? donation in his favour
A: 0 What are the warranties of seller of documents

0 Evidence of possession or control of of title?
goods described therein
1 Medium of transferring title and A:
possession over the goods described 0 Genuiness of the Document
therein without having to effect actual 1 Legal right to negotiate or transfer
delivery (Villanueva, 2009 ed.) 2 No knowledge of fact which would
2 The custody of a negotiable warehouse impair the validity or worth of the
receipts issued to the order of the document
owner, or to bearer, is a representation 3 Right to transfer Title to the goods and
of title upon which bona fide purchasers merchantability or fitness for a
for value are entitled to rely , despite particular purpose, whenever such
breaches of t rust or violations of warranties would have been implied had
agreement on the part of the apparent the contract transfer the goods without
owner (Siy Cong Bieng v. HSBC, 56 Phil a document.
598)
Rules Regarding Levy and Garnishment of Goods
Negotiable Documents of Title
0 What does a person to whom a non‐
Q: What is a Negotiable Document of Title? negotiable instrument has been transferred but
not negotiated, acquire as against the
A: A document of title which states that the goods transferor?
referred therein will be delivered to the bearer, or
to the order of any person named in such 0 He acquires:
document (Art. 1509, NCC). 0 Title to the goods, subject to the terms
of any agreement with the transferor;
1 Right to notify the bailee who issued the
document of the transfer thereof,
CIVIL LAW TEAM:
SALES
and thereby to acquire the direct X. REMEDIES OF AN UNPAID SELLER

obligation of such bailee to hold
possession of the goods for him A. DEFINITION OF UNPAID SELLER
according to the terms of the
document. Q: Who is an unpaid seller?
5888 How may the transferor’s creditor defeat 0 The seller of goods is deemed to be an unpaid
the aforementioned rights of the transferee? seller either:
0 when the whole of the price has not
0 Prior to the notification to such bailee by the been paid or tendered; or
transferor or transferee of a non‐negotiable 1 when a bill of exchange or other
document of title, the title of the transferee to negotiable instrument has been
the goods and the right to acquire the obligation received as conditional payment, and
of such bailee may be defeated by the the condition on which it was received
transferor’s creditor by the levy of an attachment has been broken by reason of the
or execution upon the goods. (Art. 1514, NCC) dishonor of the instrument, the
insolvency of the buyer, or otherwise.
0 If the goods are delivered to a bailee by the
owner or by a person whose act in conveying the Note: It includes an agent of the seller to whom the
title to them to a purchaser in good faith for bill of lading has been indorsed, or consignor or
value and a negotiable instrument was issued for agent who has himself paid, or is directly responsible
them, can the said goods be attached, garnished for the price, or any other person who is in the
or levied upon? position of a seller.
A: B. REMEDIES OF UNPAID SELLER

GR: No, the goods cannot be attached,
garnished or levied upon while they are in Q: What are the remedies of an Unpaid Seller?
the bailee’s possession.
A:
XPN: Ȁ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀȀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ0 O
0 When the document is first rdinary
surrendered; or
1 When its negotiation is enjoined.
Note: The bailee shall in no case be compelled

to deliver the actual possession of the goods
until the document is:
0 Surrendered to him; or
1 Impounded by the court.
(Art. 1519, NCC)
0 What are the rights of a creditor whose

debtor is the owner of a negotiable document of
title?
0 He is entitled to such aid from courts of

appropriate jurisdiction by:
1. injunction;
2. attaching such document;
3. as regards property which cannot be readily
attached or levied upon by ordinary legal process
‐ satisfying the claim by means allowed by law or
equity. (Art. 1520, NCC)
̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ 1 price is payable on a day certain
ᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀ 2 goods cannot readily be resold for
ĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀ reasonable price and Art. 1596 is
ĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀Ā inapplicable
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ
̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀ
㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
ᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀ĀЀĀȀȀ⸀ĀᜀĀ
Ā̀ĀȀ㨀ĀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀ
ᜀĀᜀĀᜀĀᜀĀᜀĀĀĀ̀ЀĀȀĀ⸀Ā ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀ĀЀĀȀȀ⸀ĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀȀĀȀ⸀ĀЀĀĀĀĀ ᜀĀᜀĀᜀĀᜀĀĀĀ̀ЀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀȀĀȀ⸀ĀЀĀĀĀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀԀĀȀ⸀Ā ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀԀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀĀĀЀĀȀĀ⸀Ā ĀᜀĀ̀ĀĀĀЀĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀЀĀĀĀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ
㨀ĀЀĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀ ᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀ĀЀĀȀȀ⸀Ā
ᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀ ᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀ ᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀ
ĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀ĀЀĀȀȀ⸀Ā ᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā ᜀĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā̀ĀĀĀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀ
̀ ̀
㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ ĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā
ᜀĀ̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀ ᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀĀȀĀȀĀ⸀Ā
ĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀĀĀĀĀᜀĀᜀĀᜀĀᜀĀ
ᜀĀᜀĀᜀĀ̀ĀȀ㨀ĀĀȀĀ⸀ĀЀĀȀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ
ЀЀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀᜀ
㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ
ĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀ
ᜀᄀ̀ ĀȀ㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀ1 Action for
ᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀ Damages – In case of wrongful neglect
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀Ā or refusal by the buyer to accept or pay
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ for the thing sold
ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ
ĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀ 0 Special
ĀᜀĀᜀĀ̀ĀĀȀĀȀĀ⸀ĀᜀĀᜀĀᜀ
ĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀĀĀĀĀ 0 Possessory Lien – Seller not bound to
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀 deliver if buyer has not paid him the
price. It is exercisable only in following
ĀĀȀĀ⸀ĀЀĀȀȀ⸀ĀᜀĀᜀĀᜀĀᜀ
circumstances:
ĀᜀĀᜀЀЀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀ
0 goods sold without stipulation as
ᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ㨀ĀᜀĀᜀĀ to credit
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀȀ㨀Ā̀ĀĀĀĀ 1 goods sold on credit but term of
ᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ ̀ ĀȀ credit has expired
㨀Ā̀ĀĀĀĀᜀĀᜀĀᜀĀᜀ0 2 buyer becomes insolvent
Action for Price Exercised
when: Note: When part of goods delivered, may
0 ownership has passed to buyer; still exercise right on goods undelivered
de 255
0 Stoppage in Q: When are goods considered to be in transit?

Transitu Requisites:
I‐SENT‐U A:
0 Insolvent buyer ᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀĀĀ̀ĀĀĀ̀ĀȀȀ⸀ĀЀĀĀ̀ĀᜀĀᜀĀᜀĀᜀ
1 Seller must Surrender the ᄀĀȀĀ㨀ĀĀ1024 After delivery to a
ĀᜀĀ̀ĀĀᄀ
negotiable document of title, if any carrier or other bailee and before the
2 Seller must bear the Expenses of buyer or his agent takes delivery of
delivery of the goods after the them; and
exercise of the right. ᜀĀᜀĀᜀĀᜀĀᜀĀ̀ĀĀĀ̀ĀĀĀ̀ĀȀȀ⸀ĀЀĀĀ̀ĀᜀĀᜀĀᜀĀᜀ
3 Seller must either actually take ĀᜀĀ̀ĀĀᄀᄀĀȀĀ㨀ĀĀ1025 If the goods are
possession of the goods sold or rejected by the buyer, and the carrier or
give Notice of his claim to the other bailee continues in possession of
carrier or other person in them. (Art. 1531, par. 1)
possession
4 Goods must be in Transit 0 When are goods deemed to be no longer in
5 Unpaid seller transit?
A:
1 Special Right to Resell the 0 After delivery to the buyer or his agent
Goods Exercised when: 1 If the buyer/agent obtains possession of
0 Goods are perishable, the goods at a point before the
1 Stipulated the right of resale in destination originally fixed;
case of default, or 2 If the carrier or the bailee acknowledges
2 Buyer in default for unreasonable that he holds the goods in behalf of the
time buyer/ his agent;
3 If the carrier or bailee wrongfully
2 Special Right to refuses to deliver the goods to the
Rescind Requisites: buyer or his agent. (Villanueva, p. 181)
0 Expressly stipulated OR buyer is in
default for unreasonable time XI. PERFORMANCE OF CONTRACT
1 Notice needed to be given by seller
to buyer 0.0 SALE OF PERSONAL PROPERTY.
Note: Ownership of goods already with buyer but

RULES ON SALE OF PERSONAL PROPERTY.
seller may still rescind; ownership is destroyed even
without court intervention but in ordinary sale, need
to go to court. INSTALLMENT SALES LAW
0 What are the instances when possessory lien 0 What is the Installment Sales Law?
is lost?
0 Commonly known as the Recto Law. It is
A: embodied in Art. 1484 of the NCC which provides
0 Seller delivers without reserving for the remedies of a seller in the contracts of sale
ownership in goods or right to possess of personal property by installments.
them
Note: Art. 1484 of the NCC incorporates the
2. Buyer or agent lawfully obtains
provisions of Act No. 4122 passed by the Philippine
possession of goods
Legislature on Dec. 9, 1939, known as the
0 Waiver
"Installment Sales Law" or the "Recto Law," which
then amended Art. 1454 of the Civil Code of 1889.
Note: Seller loses lien when he parts with goods (but
still, stoppage in transitu can be exercised)
Q: To what does the Recto Law apply?
Q: What is the right of stoppage in transitu?
5888 This law covers contracts of sale of
personal property by installments (Act No. 4122).
768 The seller may resume possession of the
It is also applied to contracts purporting to be
goods at any time while they are in transit, and he
leases of personal property with option to buy,
will then become entitled to the same rights in
when the lessor has deprived the lessee of the
regard to the goods as he would have had if he
possession or enjoyment of the thing. (PCI
had never parted with the possession. (Art. 1530,
Leasing and Finance Inc. v. Giraffe‐ X Creative
NCC)
Imaging, Inc., G.R. No. 142618, July 12, 2007)
CIVIL LAW TEAM:
SALES
฀0ༀကᄀሀጀ᐀ᔀᘀᜀ᠀ᬀ
ᤀᨀᨀᬀ
ᰀ ᴀḀἀ ℀∀⌀␀─☀✀⠀⤀⨀⬀Ⰰpayable
ⴀ⸀ on installments. The law declares as
⼀　㄀㈀㌀㐀㔀㘀㜀㠀㤀㨀㬀㰀㴀㸀㼀䀀䄀䈀䌀䐀䔀䘀䜀䠀䤀䨀䬀䰀䴀一伀倀儀刀匀吀唀嘀圀堀夀娀嬀尀崀帀开怀愀戀挀搀攀昀
"public policy to protect buyers of real estate on
ꔀꘀ꜀ꠀ꤀ꨀ꬀ 가관글꼀뀀넀눀대됀딀똀뜀렀뤀먀묀밀봀븀뼀쀀섀숀쌀쐀씀였윀저준쨀쬀찀촀츀케퀀턀툀팀퐀픀혀휀installment payments against onerous and
What are the alternative remedies in case of sale oppressive conditions.
of personal property in installments?
Note: The purpose of the law is to protect buyers in
A: installment against oppressive conditions.
0 Specific Performance: Exact fulfillment
should the buyer fail to pay 0 What are the transactions/sale covered by
the Maceda Law?
GR: If availed of, the unpaid seller
cannot anymore choose other 0 The law involves the sale of immovables on
remedies; installment (Maceda Law, R.A. 6552).
0 Coverage: Residential Real Estate
XPN: if after choosing, it has become (Villanueva, p. 431)
impossible, rescission may be pursued 1 Exclude:
0 Industrial lots
1 Rescission: Cancel the sale if buyer fails 1 Commercialbuildings (and
to pay 2 or more installments commercial lots by implication)
2 Sale to tenants under agrarian laws
Deemed chosen when:
1.0 Notice of rescission is sent 1 What are the rights granted to buyers?
1.1 Takes possession of subject matter
of sale A:
1.2 Files action for rescission 0 Buyer paid at least 2 years installment
0 Pay w/o interest the balance within
2 Foreclosure: Foreclose on chattel grace period of 1 month for every
mortgage if buyer fails to pay 2 or more year of installment payment. Grace
installments period to be exercised once every
5 years.
GR: Actual foreclosure is necessary to 1 When no payment – cancelled;
bar recovery of balance buyer entitled to 50% of what he
2.0.0 Extent of barring effect: has paid + 5% for every year but
purchase price not exceeding 90% of payments
made
XPN: Mortgagor refuses to deliver
property to effect foreclosure; expenses Note: Cancellation to be effected 30
incurred in attorneys fees, etc. days from notice & upon payment of
cash surrender value.
0 When the lessor of the property chose to
deprive the lessee of the subject personal 1 Buyer paid less than 2 years installment
property, can the former recover any unpaid 0 Grace period is not less than 60
rentals from the latter? days from due date
1 Cancellation if failure to pay w/in
0 In choosing, through replevin, to deprive the 60 days grace
respondent of possession of the leased 2 30 days notice before final
equipment, the petitioner waived its right to bring cancellation
an action to recover unpaid rentals on the said
Note: buyer can still pay w/in the 30
leased items.
days period with interest.
0 SALE OF REAL PROPERTY.
0 What are the other rights granted to a buyer?
RULES ON SALE OF REAL PROPERTY
A:
0 Sell or assign rights to another
REALTY INSTALLMENT BUYER ACT
1 Reinstate contract by updating within
30 days before and cancellation
Q: What is the Realty Installment Buyer Act?
2 Deed of Sale to be done by notarial act
0 Commonly known as the “Maceda Law.” It is
embodied in R.A. 6552 which provides for certain
protection to particular buyers of real estate
de
DerechoCivil
257
0 Pay full installment in advance the Bernie discovered that DEVLAND had failed to
balance of price anytime w/o interest develop the subdivision in accordance with the
1 Have full payment annotated in approved plans and specifications within the
certificate of title time frame in the plan. He thus wrote a letter to
DEVLAND informing it that he was stopping
Note: Applies to contracts even before the law was payment. Consequently, DEVLAND cancelled the
enacted. Stipulation to the contrary is void sale and wrote Bernie, informing him that his
payments are forfeited in its favor.
0 What are the so‐called “Maceda” and “Recto” Was the action of DEVLAND proper?
laws in connection with sales on installments? Explain.
Give the most important features on each law. Discuss the rights of Bernie under the
circumstances.
0 The Maceda Law (R.A. 6552) is applicable to Supposing DEVLAND had fully developed
sales of immovable property on installments. The the subdivision but Bernie failed to pay
most important features are: further installments after 4 years due
to business reverses. Discuss the rights
0 After having paid installments for at least and obligations of the parties.
two years, the buyer is entitled to a
mandatory grace period of one month for A:
every year of installment payments made, Assuming that the land is a residential
to pay the unpaid installments without subdivision project under P.D. No. 957
interest. (The Subdivision and Condominium
Buyers Protective Decree), DEVLAND's
If the contract is cancelled, the seller shall action is not proper because under
refund to the buyer the cash surrender Section 23 of said Decree, no
value equivalent to fifty percent (50%) of installment payment shall be forfeited
the total payments made, and after five to the owner or developer when the
years of installments, an additional five buyer, after due notice, desists from
percent (5%) every year but not to exceed further payment due to the failure of
ninety percent (90%) of the total the owner‐developer to develop the
payments made. subdivision according to the approved
plans and within the time limit for
1 In case the installments paid were less complying with the same.
than 2 years, the seller shall give the buyer
a grace period of not less than 60 days. If Under the same Section of the Decree,
the buyer fails to pay the installments due Bernie may, at his option, be
at the expiration of the grace period, the reimbursed the total amount paid
seller may cancel the contract after 30 including amortization interests but
days from receipt by the buyer of the excluding delinquency interests at the
notice of cancellation or demand for legal rate. He may also ask the Housing
rescission by notarial act. (Rillo v. CA, G.R. and Land Use Regulatory Board to apply
No. 125347 June 19, 1997) penal sanctions against DEVLAND
consisting of payment of administrative
The Recto Law (Art.1484) refers to sale of fine of not more than P20.000.00
movables payable in installments and limiting the and/or imprisonment for not more than
right of seller, in case of default by the buyer, to 20 years.
one of three remedies:
Exact fulfillment; Under R.A. No. 6552 (Maceda Law),
Cancel the sale of two or more installments DEVLAND has the right to cancel the
have not been paid; contract but it has to refund Bernie the
Foreclose the chattel mortgage on the things cash surrender value of the payments
sold, also in case of default of two or on the property equivalent to 50% of
more installments, with no further action the total payments made. (2005 Bar
against the purchaser. (1999 Bar Question)
Question)
Bernie bought on installment a residential

subdivision lot from DEVLAND. After having
faithfully paid the installments for 48 months,
CIVIL LAW TEAM:
SALES
XII. WARRANTIES B. IMPLIED WARRANTIES
What is a warranty? Q: What are implied warranties?
A statement or representation made by the seller Warranties deemed included in all contracts of
of goods, as part of the contract of sale, having sale by operation of law. (Art. 1547)
reference to the character, quality, or title, of the
goods, and by which he promises or undertakes Warranty that seller has right to sell – refers
to insure that certain facts are or shall be as he to consummation stage. Not applicable
then represents. to sheriff, auctioneer, mortgagee,
pledge
Note: May either be express or implied.
Warranty against eviction
What is the effect of a breach of warranty?
Requisites: JPENS
Buyer may: Buyer is Evicted in whole or in part from
Refuse to proceed with the contract; or the subject matter of sale
Proceed with the contract; waive the Final Judgment
condition. Basis of eviction is a right Prior to sale
or act imputable to seller
Note: If the condition is in the nature that it should Seller has been Summoned in the suit
happen, the non‐performance may be treated as a for eviction at the instance of
breach of warranty. buyer; or made 3rd party
defendant through 3rd party
What are the kinds of warranties? Distinguish. complaint brought by buyer
No waiver on the part of the buyer
A:
Express Note: For eviction – disturbance in law is
Implied required and not just trespass in fact.
A. EXPRESS WARRANTIES Warranty against encumbrances (non‐

apparent)
What are express warranties?
Requisites:
Any affirmation of fact or any promise by the immovable sold is encumbered with
seller relating to the thing if the natural tendency non‐apparent burden or servitude
of such affirmation or promise is to induce the not mentioned in the agreement
buyer to purchase the same, and if the buyer nature of non‐apparent servitude or
purchases the thing relying thereon. (Art. 1546) burden is such that it must be
presumed that the buyer would
What are the requisites of express warranties? not have acquired it had he been
aware thereof
AIR
It must be an Affirmation of fact relating to XPN: warranty not applicable when
the subject matter of sale non‐apparent burden or servitude is
Natural tendency is to Induce buyer to recorded in the Registry of Property –
purchase subject matter unless there is expressed warranty that
Buyer purchases the subject matter Relying the thing is free from all burdens &
thereon encumbrances
What is the liability of the seller for breach of Warranty against Hidden Defects
express warranties?
Requisites: HENNAS
The seller is liable for damages. (Villanueva, p. a. Defect is important or Serious
249) The thing sold is unfit for the use
which it is intended
Diminishes its fitness for such use
or to such an extent that
de
the buyer would not have What is covered by a warranty against eviction?
acquired it had he been aware
thereof It covers eviction by a final judgment based on a
Defect is Hidden right prior to the sale or an act imputable to the
Defect Exists at the time of the sale vendor, the vendee is deprived of the whole or of
Buyer gives Notice of the defect to the a part of the thing purchased.
seller within reasonable time
Action for rescission or reduction of the The vendor shall answer for the eviction even
price is brought within the proper though nothing has been said in the contract on
period the subject. (Art. 1548, NCC)
6 months – from delivery of the
thing sold What is the effect of a breach of warranty
Within 40 days – from the delivery against eviction?
in case of animals
There must be No waiver of warranty The buyer shall have the right to demand the
on the part of the buyer. seller:
When is implied warranty not applicable? The return of the value which the thing sold
had at the time of the eviction, be it
ASAP greater or lesser than the price of the
“As is and where is” sale sale
Sale of second hand articles The income or fruits, if he has been ordered
Sale by virtue of authority in fact or law to deliver them to the party who won
Sale at public auction for tax delinquency the suit against him
The costs of suit which caused the eviction,
C. EFFECTS OF WAIVER OF IMPLIED WARRANTIES and, in a proper case, those of suit
brought against the vendor for the
What are the effects of waiver of an implied waranty
warranty? The expenses of contract if buyer has paid
them
A: The damages and interests and ornamental
Seller in bad faith & there is waiver against expenses if sale was made in bad faith.
eviction –void
When buyer w/o knowledge of a particular Note: Vendor is liable for any hidden defect even if
risk, made general renunciation of he is not aware. (Caveat Venditor)
warranty – is not a waiver but merely
limits liability of seller in case of eviction Purchaser must be aware of the title of the vendor.
When buyer with knowledge of risk of (Caveat Emptor)
eviction assumed its consequences &
made a waiver – seller not liable What are the rights of buyer in case of partial
(applicable only to waiver of warranty eviction?
against eviction)
A:
WARRANTY AGAINST EVICTION Restitution (with obligation to return the
thing w/o other encumbrances than
Q: What is a warranty against eviction? those which it had when he acquired it)
Enforcement of warranty against eviction
In a contract of sale, unless a contrary intention (Paras, p. 153 and Art. 1556)
appears, there is an implied warranty on the part
of the seller that when the ownership is to pass, WARRANTY AGAINST HIDDEN DEFECT
and that the buyer shall from that time have and
enjoy the legal and peaceful possession of the Q: What is a hidden defect?
st
thing. (Art. 1547, 1 paragraph)
A hidden defect is one which is unknown or could
not have been known to the buyer. (Diaz, p. 145)
CIVIL LAW TEAM:
SALES
Note: Seller does not warrant patent defect; Caveat If the contrary has been stipulated, and the
emptor (buyer beware) vendor was not aware of the hidden
faults or defects in the thing sold. (Art.
What is a redhibitory defect? 1566)
It is a defect in the article sold against which What is the effect of a breach of warranty
defect the seller is bound to warrant. The vice against hidden defects?
must constitute an imperfection, a defect in its
nature, of certain importance; and a minor defect It would depend on whether the seller had
does not give rise to redhibition. (De Leon, knowledge of such defect and whether there has
Comments and Cases on Sales and Lease, 2005 been a waiver of the warranty.
ed, p. 318)
If the thing should be lost in consequence of
What is a redhibitory defect on animals? the hidden faults, and seller was aware
of them – he shall:
If the hidden defect of animals, even in case a bear the loss,
professional inspection has been made, should be return the price and
of such a nature that expert knowledge is not refund the expenses of the contract
sufficient to discover it, the defect shall be with damages
considered as redhibitory.
If the thing is lost and seller was not aware
When is the sale of animal void? of the hidden faults – he shall:
return the price and interest
The sale is void if animal is: reimburse the expenses of the contract
Suffering from contagious diseases; which the buyer might have paid,
Unfit for the use or service for which they but not for damages. (Villanueva,
were purchased as indicated in the Law on Sales,2004 ed, pp. 548‐549)
contract
What are the remedies of the buyer in case of
When is a vendor responsible for hidden sale of things with hidden defects?
defects?
The vendee may elect between:
If the hidden defects which the thing sold may Withdrawing from the contract, or
have: Demanding a proportionate reduction of the
Render it unfit for the use for which it is price, with damages in either case.
intended, or
Diminish its fitness for such use to such an Is there a waiver of warranty against hidden
extent that, had the vendee been defects when the lessee inspected the premises
aware thereof, he would not have and pushed through with the contract?
acquired it or would have given a lower
price for it. (Art. 1561) Yes. Under Arts. 1561 and 1653 of the Civil Code,
the lessor is responsible for warranty against
Up to what extent does the seller warrant hidden defects, but he is not answerable for
against hidden defects? patent defects or those, which are visible. Jon de
Ysasi admitted on cross‐examination that he
The seller is responsible to the vendee for any inspected the premises three or four times before
hidden faults or defects in the thing sold, even signing the lease contract. During his inspection,
though he was not aware thereof. he noticed the rotten plywood on the ceiling,
which in his opinion was caused by leaking water
When is the seller not answerable for the or termites. Yet, he decided to go through with
defects of the thing sold? the lease agreement. Hence, respondents cannot
be held liable for the alleged warranty against
A: hidden defects. (Jon and Marissa De Ysasi v.
For patent defects or those which are visible, Arturo and Estela Arceo, G.R. No. 136586, Nov.
or 22, 2001)
Even for those which are not visible if the
buyer is an expert who, by reason of his
trade or profession, should have known
them (Art. 1561), or
de
IMPLIED WARRANTIES IN CASE OF SALE OF are inscribed on the face of certificate of title.
GOODS (Pineda sales, p. 275)
What are the specific implied warranties in sale Q: Does caveat emptor apply in judicial sales?
of goods?
Yes. The purchaser in a judicial sale acquires no
A: higher or better title or right than that of the
Warranty of fitness judgment debtor. If it happens that the judgment
debtor has no right, interest, or lien on and to the
GR: No implied warranty property sold, the purchaser acquires none.
(Pineda sales, p. 280)
XPN:
Buyer manifests to the seller the D. REMEDIES IN CASE OF BREACH OF WARRANTY
particular purpose for which the
goods are required; and What are the remedies of the buyer in case of
Buyer relies upon the seller’s skill or breach of warranty?
judgment
A:
Warranty of merchantability – That goods Accept goods & set up breach of warranty by
are reasonably fit for the general way of recoupment in diminution or
purpose for which they are sold. extinction or the price.
Accept goods & maintain action against seller
CAVEAT EMPTOR for damages
Refuse to accept goods & maintain action
What does the principle of caveat emptor against seller for damages
mean? Rescind contract of sale & refuse to receive
goods/return them when already
It literally means, ‘Let the buyer beware’. The rule received.
requires the purchaser to be aware of the
supposed title of the vendor and one who buys Are the remedies of the buyer in case of breach
without checking the vendor’s title takes all the of warranty absolute?
risks and losses consequent to such failure.
(Agcaoili, p. 184) No. The vendee's remedies against a vendor with
respect to the warranties against hidden defects
In what particular sale transactions does caveat of or encumbrances upon the thing sold are not
emptor apply? limited to those prescribed in Article 1567 where
the vendee, in the case of Arts. 1561, 1562, 1564,
A: 1565 and 1566, may elect either to withdraw
Sales of animals (Art. 1574) from the contract or demand a proportionate
Double sales (Art. 1544) reduction of the price, with damages in either
In sheriff’s sales (Art. 1570) case.
Tax sales (Art. 1547, last paragraph)
The vendee may also ask for the annulment of the
Note: In the above sales, there is no warranty of title contract upon proof of error or fraud, in which
or quality on the part of the seller. The purchaser case the ordinary rule on obligations shall be
who buys without checking the title of the vendor is applicable. Under the law on obligations,
assuming all risks of eviction. responsibility arising from fraud is demandable in
all obligations and any waiver of an action for
In sheriff’s sales, the sheriff does not guarantee the
future fraud is void. Responsibility arising from
title to real property and it is not incumbent upon
negligence is also demandable in any obligation,
him to place the buyer in possession of such
but such liability may be regulated by the courts,
property. (Pineda sales, p. 275)
according to the circumstances.
Is caveat emptor applicable in sales of registered
land? The vendor could likewise be liable for quasi‐
delict under Article 2176 of the Civil Code, and an
action based thereon may be brought by the
No. The purchaser of a registered land under the
vendee. While it may be true that the pre‐existing
Torrens system is merely charged with notice of
contract between the parties may, as a general
the burdens and claims on the property which
CIVIL LAW TEAM:
SALES
rule, bar the applicability of the law on quasi‐ XIII. BREACH OF CONTRACT
delict, the liability may itself be deemed to arise
from quasi‐delict, i.e., the acts which breaks the A. REMEDIES OF THE SELLER
contract may also be a quasi‐delict. (Coca‐Cola Note: see Recto and Maceda Law (XI. Performance
Bottlers Philippines, Inc. v. CA, G.R. No. 110295, of Contract) p. 258
Oct. 18, 1993)
B. REMEDIES OF THE BUYER
What are the instances when the buyer cannot
rescind the sale in case there is a breach of Q: What are the remedies of the buyer?
warranty?
A:
If he knew of the breach of warranty Immovables in general
If he fails to return or offer to return goods Disturbed in possession or with reasonable
to seller in substantially as good grounds to fear disturbance
condition as they were at time – Suspend payment
ownership was transferred In case of subdivision or condo projects
If he fails to notify the seller within a – If real estate developer fails to comply
reasonable time of his election to with obligation according to approved
rescind plan:
Rescind
CONDITION VIS‐À‐VIS WARRANTY Suspend payment until seller complies
Movables
What is the effect of non‐fulfillment of a Failure of seller to deliver – Action for
condition? specific performance without giving the
seller the option of retaining the goods
If imposed on the perfection of contract – on payments of damages
prevents the juridical relation itself from coming Breach of seller’s warranty – The buyer may,
into existence at his election, avail of the following
remedies:
The other party may: Accept goods & set up breach of
Refuse to proceed with the contract warranty by way of recoupment in
Proceed w/ contract, waiving the diminution or extinction or the
performance of the condition price.
Accept goods & maintain action against
What is the difference between a condition and seller for damages
a warranty? Refuse to Accept goods & maintain
action against seller for damages
A: Rescind contract of sale & refuse to
CONDITION WARRANTY receive goods/return them when
Purports to the Purports to the already received.
performance of
existence of obligation Note: When the buyer has claimed and been
obligation
Must be stipulated to Need not be stipulated; granted a remedy in any of these ways, no other
may form part of remedy can thereafter be granted, without
form part of the prejudice to the buyer’s right to rescind, even if
obligation by provision
obligation previously he has chosen specific performance
of law
Relates to the subject when fulfillment has become impossible.
May attach itself to
matter itself or to (Villanueva, p. 389 in relation with Art. 1191,
obligation of seller to NCC)
obligation of the seller
deliver possession &
as to the subject matter
transfer Disturbed in possession or with reasonable
of the sale
grounds to fear disturbance
– Suspend payment
de 263
XIV. EXTINGUISHMENT OF SALE What is the difference between pre‐emption and

redemption?
A. CAUSES OF EXTINGUISHMENT
A:
What are the causes for extinguishment of sale? PRE‐EMPTION REDEMPTION
Arises before sale Arises after sale
A contract of sale is extinguished by: Rescission inapplicable There can be rescission
of original sale
Same causes as all other obligations, namely: Action is directed against Action is directed
Payment or performance prospective seller against buyer
Loss of the thing due
Condonation or remission of the debt B. PERIOD OF REDEMPTION
Confusion or merger of the rights of
creditor and debtor Q: What is the period of redemption?
Compensation
Novation A:
Annulment No period agreed upon – 4 years from date
Rescission of contract
Fulfillment of resolutory condition When there is agreement – should not
prescription exceed 10 years; but if it exceeded, valid
Causes stated in the preceding articles; only for the first 10 years.
Conventional Redemption; or When period to redeem has expired & there
Legal redemption has been a previous suit on the nature
of the contract – seller still has 30 days
B. REDEMPTION from final judgment on the basis that
contract was a sale with pacto de retro:
Q: What is redemption?
Rationale: no redemption due to
It is a mode of extinguishment wherein the seller erroneous belief that it is equitable
has the right to redeem or repurchase the thing mortgage which can be extinguished by
sold upon return of the price paid. paying the loan.
Q: What are the kinds of redemption? When period has expired & seller allowed
the period of redemption to expire –
A: seller is at fault for not having exercised
Legal his rights so should not be granted a
Conventional new period
Should the right to redeem be incorporated in Note: Tender of payment is sufficient but it is not in
every contract of sale? itself a payment that relieves the seller from his
liability to pay the redemption price.
The right of the vendor to redeem/ repurchase
When does period of redemption begin to run?
must appear in the same instrument. However,
parties may stipulate on the right of repurchase in
A:
a separate document but in this case, it is valid
Right of legal pre‐emption or redemption
only between the parties and not against third
shall be exercised within 30 days from
persons. (Pineda, p. 333)
written notice by the buyer – deed of
sale not to be recorded in
Registry of Property unless
accompanied by affidavit that buyer has
given notice to redemptioners
When there is actual knowledge, no need to

give written notice; period of
redemption begins to run from actual
knowledge
CIVIL LAW TEAM:
SALES
D. EXERCISE OF THE RIGHT TO REDEEM property which he ought not, in equity and good
conscience, hold and enjoy. It has been broadly
Is written notice mandatory for the right of ruled that a breach of confidence, although in
redemption to commence? business or social relations, rendering an
acquisition or retention of property by one person
Yes, the notice must be in writing stating the unconscionable against another, raises a
execution of the sale and its particulars. It may be constructive trust. It is raised by equity in respect
made in a private or public document. (Pineda, p. of property, which has been acquired by fraud, or
400) where, although acquired originally without fraud,
it is against equity that it should be retained by
Is there a prescribed form for an offer to the person holding it. (Arlegui v. CA G.R. No.
redeem? 126437, Mar. 6, 2002)
There is no prescribed form for an offer to Note: "A constructive trust is substantially an
redeem to be properly effected. Hence, it can appropriate remedy against unjust enrichment. It is
either be through a formal tender with raised by equity in respect of property, which has
consignation of the redemption price within the been acquired by fraud, or where, although acquired
prescribed period. What is paramount is the originally without fraud, it is against equity that it
availment of the fixed and definite period within should be retained by the person holding it." (76
Am. Jur. 2d, Sec. 222, p. 447 cited in Arlegui v. CA
which to exercise the right of legal redemption.
G.R. No. 126437, Mar. 6, 2002)
Note: Art. 1623 does not prescribe any distinctive
method for notifying the redemptioner. D. CONVENTIONAL REDEMPTION
Is tender of payment necessary for redemption Q: What is conventional redemption?

to take effect?
Seller reserved the right to repurchase thing sold
Tender of payment is not necessary; offer to coupled with obligation to return price of the sale,
redeem is enough. expenses of contract & other legitimate payments
and the necessary & useful expenses made on the
What is the effect of failure to redeem? thing sold
Note: Right to repurchase must be reserved at the

There must be judicial order before ownership of
time of perfection of sale. (Pineda, p. 333)
real property is consolidated to the buyer a retro.
E. LEGAL REDEMPTION
TRUST DE SON TORT
Q: What is legal redemption?
Q: What is a trust de son tort?
Also referred to as “retracto legal”, it is the right
It is a trust created by the purchase or
to be subrogated upon the same terms and
redemption of property by one other than the
conditions stipulated in the contract, in the place
person lawfully entitled to do so and in fraud of
of one who acquires the thing by purchase or by
the other.
dation in payment or by other transaction
whereby ownership is transmitted by onerous
Do constructive trusts arise only out of fraud or
title.
duress?
Q: What are the instances of legal redemption?
No. A constructive trust, otherwise known as a
trust ex maleficio, a trust ex delicto, a trust de son
A:
tort, an involuntary trust, or an implied trust, is a
Sale of a co‐owner of his share to a stranger
trust by operation of law which arises contrary to
(Art. 1620)
intention and in invitum, against one who, by
When a credit or other incorporeal right in
fraud, actual or constructive, by duress or abuse
litigation is sold (Art. 1634)
of confidence, by commission of wrong, or by any
Sale of an heir of his hereditary rights to a
form of unconscionable conduct, artifice,
stranger (Art. 1088)
concealment, or questionable means, or who in
Sale of adjacent rural lands not exceeding 1
any way against equity and good conscience,
hectare (Art. 1621)
either has obtained or holds the legal right to
de
Sale of adjacent small urban lands bought extending the period of redemption or
merely for speculation (Art. 1622) granting a new period is executed
Purchaser Retains for himself a part of the
Are there other instances when the right of legal purchase price
redemption is also granted? Seller binds himself to pay the Taxes on the
thing sold
A: In any other case where the real intention of
Redemption of homesteads the parties is that the transaction shall
Redemption in tax sales Secure the payment of a debt or the
Redemption by judgment debtor performance of any other obligation.
Redemption in extrajudicial foreclosure Art. 1602 shall also apply to a contract
Redemption in judicial foreclosure of purporting to be an Absolute sale. (Art.
mortgage 1604)
When does legal redemption period begin to Note: In case of doubt in determining whether it is
run? equitable mortgage or sale a retro (with right of
repurchase); it shall be construed as equitable
The right of legal redemption shall not be mortgage.
exercised except within 30 days from the notice in
writing by the prospective seller, or seller, as the Remedy is reformation.
case may be. The deed of sale shall not be An equitable mortgage is one which although lacking
in some formality, or form or words, or other
recorded in the Registry of Property unless
requisites demanded by a statute, nevertheless
accompanied by an affidavit of the seller that he
reveals the intention of the parties to charge real
has given written notice thereof to all possible property as security for a debt, and contains nothing
redemptioners. (Art. 1623, NCC) impossible or contrary to law.
EQUITABLE MORTGAGE Does inadequacy of price constitute proof

sufficient to declare a contract as one of
What is an equitable mortgage? equitable mortgage?
One which lacks the proper formalities, form or Mere inadequacy of the price is not sufficient. The
words or other requisites prescribed by law for a price must be grossly inadequate, or purely
mortgage, but shows the intention of the parties shocking to the conscience. (Diaz, p. 186)
to make the property subject of the contract as
security for a debt and contains nothing X transferred three parcels of land in favor of Y.
impossible or contrary to law The transaction was embodied in two Deeds of
Absolute Sale for the price of P240, 000. The
What are the essential requisites of equitable titles of said lots were transferred to Y. However,
mortgage? X failed to vacate and turn over the purchased
lots. This prompted Y to file an ejectment suit
A: against X. X claimed that the transactions
Parties entered into a contract of sale entered between them were not actually sales,
Their intention was to secure an existing but an equitable mortgage. Does the transaction
debt by way of a mortgage. involve an absolute sale or an equitable
mortgage of real property?
What is the rule on the presumption of an
equitable mortgage? It is an absolute sale. Decisive for the proper
determination of the true nature of the
A sale with conventional redemption is deemed transaction between the parties is the intent of
to be an equitable mortgage in any of the the parties. There is no conclusive test to
following cases: (Art. 1602) AIR‐STAR determine whether a deed absolute on its face is
Price of the sale with right to repurchase is really a simple loan accommodation secured by a
unusually Inadequate mortgage. To determine whether a deed absolute
Seller Remains in possession as lessee or in form is a mortgage in reality, the court is not
otherwise limited to the written memorials of the
Upon or after the expiration of the right to transaction. This is so because the decisive factor
repurchase Another instrument in evaluating such agreement is the intention of
CIVIL LAW TEAM:
SALES
the parties, as shown not necessarily by the operation, he was required to execute a deed of
terminology used in the contract but by all the sale over a parcel of land in favor of Eulalia. She
surrounding circumstances, such as the relative sold the property to her grandniece Jocelyn who
situations of the parties at that time; the thereafter instituted an action for ejectment
attitudes, acts, conduct, and declarations of the against the Spouses Bandong. To assert their
parties; the negotiations between them leading to right, Spouses Bandong filed an action for
the deed; and generally, all pertinent facts having annulment of sale against Eulalia and Jocelyn
a tendency to fix and determine the real nature of alleging that there was no sale intended but only
their design and understanding. As such, equitable mortgage for the purpose of securing
documentary and parol evidence may be the shortage incurred by Domeng in the amount
submitted and admitted to prove the intention of of P70, 000.00 while employed as “biyahero” by
the parties. (Sps Austria v. Sps Gonzales, G.R. No. Eulalia. Was the deed of sale between Domeng
147321, Jan. 21, 2004) and Eulalia a contract of sale or an equitable
mortgage?
Ceballos was able to borrow from Mercado
certain sum of money and as security, she It is an equitable mortgage. In executing the said
executed a Deed of Real Estate Mortgage over deed of sale, Domeng and Eulalia never intended
the subject property. The said mortgage was not the transfer of ownership of the subject property
registered. Ceballos defaulted. Thereafter, a but to burden the same with an encumbrance to
Deed of Absolute Sale was executed by Ceballos secure the indebtedness incurred by Domeng on
and her husband whereby the mortgaged the occasion of his employment with Eulalia. The
property was sold to Mercado for the price of agreement between Dominador and Eulalia was
P16, 500.00. Ceballos offered to redeem the not avoided in its entirety so as to prevent it from
property from Mercado for the price of P30, producing any legal effect at all. Instead, the said
000.00 but the latter's wife refused since the transaction is an equitable mortgage, thereby
same was already transferred in their names by merely altering the relationship of the parties
virtue of the Deed of Absolute Sale. As a from seller and buyer, to mortgagor and
consequence, Ceballos filed the case contending mortgagee, while the subject property is not
that the Contract should be declared as an transferred but subjected to a lien in favor of the
equitable mortgage.Is the contention of Ceballos latter. (Sps. Raymundo, et al. v. Sps. Bandong,
correct? G.R. No. 171250, Jul. 4, 2007)
G. DISTINGUISHED FROM
No. The instances when a contract, regardless of OPTION TO BUY
its nomenclature, may be presumed to be an
equitable mortgage are enumerated in Art. 1602 On May 19, 1951, the spouses‐sellers executed a
of the Civil Code. Here, none of those public instrument of absolute sale in favor of the
circumstances were present. The original buyer for a consideration which is sufficiently
transaction was a loan. Ceballos failed to pay the adequate. A few days thereafter, the buyers
loan; consequently, the parties entered into executed in favor of the sellers an option to buy
another agreement — the assailed, duly notarized within one year, the property subject of the
Deed of Absolute Sale, which superseded the loan absolute sale, which option was extended for a
document. Ceballos had the burden of proving month. Prior to the expiration of said one‐ year
that she did not intend to sell the property and period, the buyer sold said property to a third
that Mercado did not intend to buy it; and that person.
the new agreement did not embody the true
intention of the parties. (Ceballos v. Intestate If the spouses‐sellers would file an action for
Estate of the Late Emigdio Mercado, G.R. No. reformation of instrument where they seek
155856, May 28, 2004) reformation of the absolute sale into one of
equitable mortgage, will said action prosper?
Eulalia was engaged in the business of buying
and selling large cattle. In order to secure the No, it will not prosper. If a seller has been granted
financial capital she advanced for her employees merely an option to buy (not a right to
(biyaheros) she required them to surrender TCT repurchase) within a certain period, and the price
of their properties and to execute the paid by the buyer is adequate, the sale is absolute
corresponding Deeds of Sale in her favor. and cannot be construed nor presumed to be one
Domeng Bandong was not required to post any of equitable mortgage, even if the period within
security but when Eulalia discovered that he which to exercise the option has been extended.
incurred shortage in cattle procurement
de
DerechoCivil
267
(Villarica, et. al. v. CA, G.R. L‐19196, Nov. 29, solicitation of a sale;
1968) offer to sell, directly or by an agent, or by a
circular, letter, advertisement or
Note: SC held that in this case, there was no sale otherwise; and
a retro and that the right of repurchase is not a a. privilege given to a member of a
right granted the seller by the buyer in a separate cooperative, corporation, partnership,
instrument. Such right is reserved by the vendor or any association and/or
in the same instrument of the sale as one of the b. the issuance of a certificate or receipt
stipulations in the contract. evidencing or giving the right of
participation in, or right to, any land in
Also, once the instrument of absolute sale is consideration of payment of the
executed, the seller can no longer reserve the membership fee or dues. (Deemed sale)
right of repurchase and any right thereafter
granted the seller by the buyer cannot be a right How are the terms “buy” and “purchase”
of repurchase but some other rights, like that of defined under the Decree?
an option to buy.
Shall include any contract to buy, purchase, or
XV. LAW ON SALE OF SUBDIVISION AND otherwise acquire for a valuable consideration a
CONDOMINIUM (PD 957) subdivision lot, including the building and other
improvements, if any, in a subdivision project or a
SCOPE OF APPLICATION condominium unit in a condominium project.
Are sales or dispositions of subdivision lots or What is a subdivision project?

condominium units prior to the effectivity of the
decree exempt from compliance with the A tract or a parcel of land registered under Act
requirements stated therein? No. 496 which is partitioned primarily for
residential purposes into individual lots with or
No. It shall be incumbent upon the owner or without improvements thereon, and offered to
developer of the subdivision or condominium the public for sale, in cash or in installment terms.
project to complete compliance with his or its
obligations as provided in the decree within two Note: It shall include all residential, commercial,
years from the date of effectivity of the Decree, industrial and recreational areas as well as open
unless otherwise extended by the Authority or spaces and other community and public areas in the
project.
unless an adequate performance bond is filed.
Note: Failure of the owner or developer to comply

Q: What is a subdivision lot?
with the obligations under this and the preceding
provisions shall constitute a violation punishable Any of the lots, whether residential, commercial,
under Sections 38 and 39 of the Decree. industrial, or recreational, in a subdivision project.
DEFINITION OF TERMS What is a complex subdivision plan?
How is “sale” or “sell” defined under the A subdivision plan of a registered land wherein a
Decree? street, passageway or open space is delineated on
the plan.
Shall include:
What is a condominium project?
Every disposition, or attempt to dispose, for
a valuable consideration, of a The entire parcel of real property divided or to be
subdivision lot, including the building divided primarily for residential purposes into
and other improvements thereof, if any, condominium units, including all structures
in a subdivision project or a thereon.
condominium unit in a condominium
project; What is a condominium unit?
contract to sell;
A part of the condominium project intended for
contract of purchase and sale;
any type of independent use or ownership,
exchange;
including one or more rooms or spaces located in
attempt to sell;
one or more floors (or part of parts of floors) in a
option of sale or purchase;
CIVIL LAW TEAM:
SALES
building or buildings and such accessories as may the building or buildings included in the
be appended thereto. condominium project in accordance
with the National Building Code (R.A.
Define the following terms: No. 6541).
The subdivision plan, as so approved, shall
Owner. then be submitted to the Director of
Registered owner of the land subject of Lands for approval.
a subdivision or a condominium project. In case of complex subdivision plans, court
approval shall no longer be required.
Developer. The condominium plan as likewise so
person who develops or improves the approved, shall be submitted to the
subdivision project or condominium Register of Deeds of the province or city
project for and in behalf of the owner in which the property lies and the same
thereof. shall be acted upon subject to the
conditions and in accordance with the
Dealer. procedure prescribed in Section 4 of the
any person directly engaged as principal Condominium Act (R.A. No. 4726).
in the business of buying, selling or
exchanging real estate whether on a Part of the required documentary attachments
full‐time or part‐time basis. to the application is a certificate of title to the
property which is free from all liens and
Broker. encumbrances. Does this bar an owner of
any person who, for commission or mortgaged property from engaging in
other compensation, undertakes to sell subdivision or condominium project while the
or negotiate the sale of a real estate mortgage is in force?
belonging to another.
No. In case any subdivision lot or condominium
Salesman. unit is mortgaged, it is sufficient if the instrument
person regularly employed by a broker of mortgage contains a stipulation that the
to perform, for and in his behalf, any or mortgagee shall release the mortgage on any
all functions of a real estate broker. subdivision lot or condominium unit as soon as
the full purchase price for the same is paid by the
REGISTRATION AND LICENSE TO SELL buyer.
Upon what agency is exclusive jurisdiction to When is a subdivision or condominium project

regulate real estate trade and business vested? deemed to be registered?
National Housing Authority Upon completion of the publication requirement
What must a registered owner of a parcel of land Note: The fact of such registration shall be
do if he wishes to convert said property into a evidenced by a registration certificate to be issued to
subdivision or condominium project? the applicant‐owner or dealer.
He shall: Re: Publication requirement: This is complied with

when the NHA has caused to be published a notice
Submit his subdivision plan to the Authority of the filing of the registration statement, at the
which shall act upon and approve the expense of the applicant‐owner or dealer, in two
same, upon a finding that the plan newspapers general circulation, one published in
English and another in Pilipino, once a week for two
complies with the Subdivision
consecutive weeks, reciting that a registration
Standards' and Regulations enforceable
statement for the sale of subdivision lots or
at the time the plan is submitted. condominium units has been filed in the National
If the conversion desired involves a Housing Authority;
condominium project, the same
procedure shall be followed except that,
in addition, the NHA shall act upon and
approve the plan with respect to
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DerechoCivil 269
After issuance of the registration certificate, may to work a fraud upon prospective
the owner or dealer already sell subdivision lots buyers.
or condominium units?
When may a license to sell or registration of a
No. He must first obtain a license to sell the subdivision or condominium project be revoked?
project within two weeks from the registration of
such project. The Authority may, motu proprio or upon verified
complaint filed by a buyer of a subdivision lot or
What is the purpose of the requirement of condominium unit, revoke the registration of any
posting of a performance bonds before a license subdivision project or condominium project and
to sell may be issued? the license to sell any subdivision lot or
condominium unit in said project by issuing an
It is to guarantee the construction and order to this effect, with his findings in respect
maintenance of the roads, gutters, drainage, thereto, if upon examination into the affairs of
sewerage, water system, lighting systems, and full the owner or dealer during a hearing, it shall
development of the subdivision project or the appear there is satisfactory evidence that the said
condominium project and the compliance by the owner or dealer:
owner or dealer with the applicable laws and
rules and regulations. is insolvent; or
has violated any of the provisions of this
Is a license to sell and performance bond Decree or any applicable rule or
required in all subdivision and condominium regulation of the Authority, or any
projects? undertaking of his/its performance
bond; or
No. The following transactions are exempt from has been or is engaged or is about to engage
said requirements: in fraudulent transactions; or
has made any misrepresentation in any
Sale of a subdivision lot resulting from the prospectus, brochure, circular or other
partition of land among co‐owners and literature about the subdivision project
co‐heirs. or condominium project that has been
Sale or transfer of a subdivision lot by the distributed to prospective buyers; or
original purchaser thereof and any is of bad business repute; or
subsequent sale of the same lot. does not conduct his business in accordance
Sale of a subdivision lot or a condominium with law or sound business principles.
unit by or for the account of a
mortgagee in the ordinary course of Note: Where the owner or dealer is a partnership
business when necessary to liquidate a or corporation or an unincorporated association,
bona fide debt. it shall be sufficient cause for cancellation of its
registration certificate and its license to sell, if any
When may a license to sell be suspended? member of such partnership or any officer or
director of such corporation or association has
been guilty of any act or omission which would be
cause for refusing or revoking the registration of
Upon verified complaint by a buyer of a an individual dealer, broker or salesman.
subdivision lot or a condominium unit in
any interested party, the Authority may, DEALERS, BROKERS AMD SALESMEN
in its discretion, immediately suspend
the owner's or dealer's license to sell What is the duration of the registration of
pending investigation and hearing of the dealers, brokers and salesmen?
case.
The NHA may motu proprio suspend the On the thirty‐first day of December of each year.
license to sell if, in its opinion, any
information in the registration However, in the case of salesmen, their
statement filed by the owner or dealer registration shall also cease upon termination of
is or has become misleading, incorrect, their employment with a dealer or broker.
inadequate or incomplete or the sale or
offering for a sale of the subdivision or
condominium project may work or tend
CIVIL LAW TEAM:
SALES
Note: Renewal of registration for the succeeding must be presented in such manner that
year shall be granted upon written application will not tend to mislead or deceive the
therefore made not less than thirty nor more than public.
sixty days before the first day of the ensuing year The owner or developer shall answerable
and upon payment of the prescribed fee, without and liable for the facilities,
the necessity of filing further statements or improvements, infrastructures or other
information, unless specifically required by the
forms of development represented or
Authority.
promised in brochures, advertisements
All applications filed beyond said period shall be
andother sales propaganda
treated as original applications. disseminated by the owner or
developer or his agents and the same
When can there be refusal or revocation of shall form part of the sales warranties
registration as dealers, brokers or salesmen? enforceable against said owner or
developer, jointly and severally.
Such registration may be refused or revoked by
the NHA if, after reasonable notice and hearing, it Note: Failure to comply with these warranties
shall determine that such applicant or registrant shall also be punishable in accordance with the
has: penalties provided for in this Decree.
violated any provision of this Decree or any Within what period must the owner or
rule or regulation made hereunder; or developer construct and provide the facilities,
made a material false statement in his improvements, infrastructures and other forms
application for registration; or of development, including water supply and
3. been guilty of a fraudulent act in lighting facilities, which are offered and
connection with any sale of a indicated in the approved subdivision or
subdivision lot or condominium unit; or condominium plans, brochures, prospectus,
demonstrated his unworthiness to transact printed matters, letters or in any form of
the business of dealer, broker, or advertisement?
salesman, as the case may be.
A:
Note: In case of charges against a salesman,
notice thereof shall also be given the broker or GR: Within one year from the date of the
dealer employing such salesman. issuance of the license for the subdivision or
condominium project
Pending hearing of the case, the Authority shall
have the power to order the suspension of the XPN: Such other period of time as may be
dealer's, broker's, of salesman's registration; fixed by the Authority.
provided, that such order shall state the cause for
ALTERATION IN APPROVED SUBDIVISION PLAN
the suspension.
What is the rule if the owner desires to make
The suspension or revocation of the registration
alterations in the approved subdivision plan?
of a dealer or broker shall carry with it all the
suspension or revocation of the registration of all
A:
his salesmen.
GR: No owner or developer shall change or
WARRANTIES OF THE OWNER OR DEVELOPER
alter the roads, open spaces, infrastructures,
facilities for public use and/or other form of
In making advertisements, does the owner or
subdivision development as contained in the
developer make warranties relative to such?
approved subdivision plan and/or
represented in its advertisements
Yes.
Advertisements that may be made through XPN: If he has obtained the permission of
newspaper, radio, television, leaflets, the Authority and the written conformity or
circulars or any other form about the consent of the duly organized homeowners
subdivision or the condominium or its association, or in the absence of the latter,
operations or activities must reflect the by the majority of the lot buyers in the
real facts and subdivision.
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RIGHTS AND REMEDIES OF A BUYER TAKE OVER DEVELOPMENT
May payment made by a buyer be forfeited in When can there be a Take‐Over Development?
favor of the owner or developer in case the
buyer desists from further payment due to the The NHA may take over or cause the
failure of the owner or developer to develop the development and completion of the subdivision
subdivision or condominium project according to or condominium project at the expenses of the
the approved plan within the time limit provided owner or developer, jointly and severally, in cases
for such? What is the buyer’s remedy in this where the owner or developer has refused or
case? failed to develop or complete the development of
the project as provided for in the Decree.
No, such forfeiture is not allowed. Such buyer
may, at his option, be reimbursed the total Note: The Authority may, after such take‐over,
amount paid including amortization interests but demand, collect and receive from the buyers the
excluding delinquency interests, with interest installment payments due on the lots, which shall be
thereon at the legal rate. utilized for the development of the subdivision.
Does a defaulting buyer have any right under the

Decree? XVI. THE CONDOMINIUM ACT (RA 4726)
Yes. The rights of the buyer in the event of this PRELIMINARIES

failure to pay the installments due for reasons
other than the failure of the owner or developer Q: What is a condominium?
to develop the project shall be governed by
Republic Act No. 6552. It is an interest in real property consisting of
separate interest in a unit in a residential,
Where the transaction or contract was entered industrial or commercial building and an
into prior to the effectivity of Republic Act No. undivided interest in common, directly or
6552 on August 26, 1972, the defaulting buyer indirectly, in the land on which it is located and in
shall be entitled to the corresponding refund other common areas of the building.
based on the installments paid after the
effectivity of the law in the absence of any Note: It may include, in addition, a separate interest
provision in the contract to the contrary. in other portions of such real property.
What is the owner or developer’s obligation in Q: What comprises a real right in condominium?
case the lot bought and fully‐paid by the buyer is
mortgaged? The real right in condominium may be ownership
or any other interest in real property recognized
In the event a mortgage over the lot or unit is by law, on property in the Civil Code and other
outstanding at the time of the issuance of the title pertinent laws.
to the buyer, the owner or developer shall
redeem the mortgage or the corresponding Q: What is a condominium unit?
portion thereof within six months from such
issuance in order that the title over any fully paid It is a part of the condominium project intended
lot or unit may be secured and delivered to the for any type of independent use or ownership,
buyer in accordance herewith. including one or more rooms or spaces located in
one or more floors (or part or parts of floors) in a
May the parties waive compliance with the building or buildings and such accessories as may
decree? be appended thereto.
No. Any condition, stipulation, or provision in Q: What is a condominium project?

contract of sale whereby any person waives
compliance with any provision of the Decree or of It is the entire parcel of real property divided or to
any rule or regulation issued thereunder shall be be divided in condominiums, including all
void. structures thereon,
CIVIL LAW TEAM:
SALES
Q: What are common areas? corporation shall constitute the

management body of the project.
The entire project excepting all units separately
granted or held or reserved. What are the incidents of a condominium grant?
What is meant by “to divide” real property? Unless otherwise expressly provided in the
enabling or master deed or the declaration of
To divide the ownership thereof or other interest restrictions, the incidents of a condominium grant
therein by conveying one or more condominiums are as follows:
therein but less than the whole thereof.
The boundary of the unit granted are the
What is the rule as regards acquisition of interior surfaces of the perimeter walls,
ownership over common areas? floors, ceilings, windows and doors
thereof.
Transfer or conveyance of a unit or apartment,
office or store or other space therein shall include Note: The following are not part of
the transfer or conveyance of the undivided the unit bearing walls, columns,
interests in the common areas or, in a proper floors, roofs, foundations and
case, the membership or shareholdings in the other common structural
condominium corporation elements of the building:
lobbies, stairways, hallways, and

Are there any restrictions as regards ownership
other areas of common use,
of condominium units provided under the
elevator equipment and shafts,
Condominium Act? central heating,
central refrigeration and central air‐
A: conditioning equipment,
As regards individuals: GR: reservoirs, tanks, pumps and other
None. central services and facilities,
pipes, ducts, flues, chutes, conduits,
XPN: where the common areas in the wires and other utility
condominium project are owned by the installations, wherever located,
owners of separate units as co‐owners except the outlets thereof when
thereof, no condominium unit therein located within the unit.
shall be conveyed or transferred to
persons other than: There shall pass with the unit, as an
Filipino citizens, or appurtenance thereof, an exclusive
Corporations at least sixty percent of easement for the use of the air space
the capital stock of which belong encompassed by the boundaries of the
to Filipino citizens unit as it exists at any particular time
and as the unit may lawfully be altered
XPN to the XPN: in cases of hereditary or reconstructed from time to time.
succession.
Note: Such easement shall be
As regards corporations: automatically terminated in any air
space upon destruction of the unit as
Where the common areas in a
to render it untenantable.
condominium project are held by a
corporation, no transfer or conveyance
Common areas are held in common by the
of a unit shall be valid if the
holders of units, in equal shares, one for
concomitanttransferofthe
each unit, unless otherwise provided.
appurtenantmembership or
stockholding in the corporation will
A non‐exclusive easement for ingress, egress
cause the alien interest in such
and support through the common areas
corporation to exceed the limits
is appurtenant to each
imposed by existing laws.
Note: Whenever the common areas in a

condominium project are held by a
condominiumcorporation,such
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unit and the common areas are subject

to such easements. damage or destruction to the project
has rendered one‐half or more of
Each condominium owner shall have the the units therein
exclusive right to paint, repaint, tile, untenantable and that
wax, paper or otherwise refinish and condominium owners holding in
decorate the inner surfaces of the walls, aggregate more than thirty percent
ceilings, floors, windows and doors interest in the common areas are
bounding his own unit. opposed to repair or restoration of
the project; or
Each condominium owner shall have the
exclusive right to mortgage, pledge or the project has been in existence in
encumber his condominium and to have excess of fifty years, that it is
the same appraised independently of obsolete and uneconomic, and that
the other condominiums but any condominium owners holding in
obligation incurred by such aggregate more than fifty percent
condominium owner is personal to him. interest in the common areas are
opposed to repair or restoration or
GR: Each condominium owner has also the remodeling or modernizing of the
absolute right to sell or dispose of his project; or
condominium.
XPN: If the master deed contains a the project or a material part thereof
requirement that the property be first has been condemned or
offered to the condominium owners expropriated and that the project
within a reasonable period of time is no longer viable, or that the
before the same is offered to outside condominium owners holding in
parties; aggregate more than seventy
percent interest in the common
May common areas be divided through judicial areas are opposed to continuation
partition? of the condominium regime after
expropriation or condemnation of
A: a material portion thereof; or
GR: Common areas shall remain
undivided, and there shall be no judicial the conditions for such partition by sale
partition thereof. set forth in the declaration of
restrictions, duly registered in
XPN: Where several persons own accordance with the terms of the
condominiums in a condominium Act, have been met.
project, an action may be brought by
one or more such persons for partition What is the rule regarding issuance of certificate
thereof by sale of the entire project, as of title where the enabling or master deed
if the owners of all of the provides that the land included within a
condominiums in such project were co‐ condominium project are to be owned in
owners of the entire project in the same common by the condominium owners therein?
proportion as their interests in the
common areas: The Register of Deeds may, at the request of all
the condominium owners and upon surrender of
Note: However, a partition shall be all their "condominium owner's" copies, cancel
made only upon a showing that: the certificates of title of the property and issue a
new one in the name of said condominium
three years after damage or destruction owners as pro‐indiviso co‐owners thereof.
to the project which renders
material part thereof unit for its How are deeds, declarations or plans for a
use prior thereto, the project has condominium project construed?
not been rebuilt or repaired
substantially to its state prior to its A:
damage or destruction, or Liberally, to facilitate the operation of the
project
CIVIL LAW TEAM:
SALES
Provisions shall be presumed to be risks, and for bonding of the

independent and severable. members of any management
body;
DECLARATION OF RESTRICTIONS
Provisions for maintenance, utility,
When should a declaration of restrictions be gardening and other services
registered and what is the effect of such? benefiting the common areas, for
the employment of personnel
The owner of a project shall, prior to the necessary for the operation of the
conveyance of any condominium therein, register building, and legal, accounting and
a declaration of restrictions relating to such other professional and technical
project. services;
For purchase of materials, supplies and
Such restrictions shall constitute a lien upon each the like needed by the common
condominium in the project, and shall insure to areas;
and bind all condominium owners in the project. For payment of taxes and special
assessments which would be a lien
Note: Such liens, unless otherwise provided, upon the entire project or common
may be enforced by any condominium owner areas, and for discharge of any lien
in the project or by the management body of or encumbrance levied against the
such project. entire project or the common
areas;
What should a declaration of restrictions For reconstruction of any portion or
provide? portions of any damage to or
destruction of the project;
The declaration of restrictions shall provide for The manner for delegation of its
the management of the project by anyone of the powers;
following management bodies: For entry by its officers and agents into
a condominium corporation, any unit when necessary in
an association of the condominium owners, connection with the maintenance
a board of governors elected by or construction for which such
condominium owners, or body is responsible;
a management agent elected by the owners For a power of attorney to the
or by the board named in the management body to sell the
declaration. entire project for the benefit of all
voting majorities, of the owners thereof when
quorums, partition of the project may be
notices, authorized under Section 8 of the
meeting date, and Condominium Act, which said
other rules governing such body or bodies. power shall be binding upon all of
the condominium owners
What may a declaration of restrictions provide? regardless of whether they assume
the obligations of the restrictions
Such declaration of restrictions, among other or not.
things, may also provide:
The manner and procedure for amending
As to any such management body; such restrictions: Provided, That the
For the powers thereof, including vote of not less than a majority in
power to enforce the provisions of interest of the owners is obtained.
the declarations of restrictions; For independent audit of the accounts of the
For maintenance of insurance policies, management body;
insuring condominium owners For reasonable assessments to meet
against loss by fire, casualty, authorized expenditures, each
liability, workmen's compensation condominium unit to be assessed
and other insurable separately for its share of such expenses
in proportion (unless otherwise
provided) to its owners fractional
interest in any common areas;

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DerechoCivil
275
For the subordination of the liens securing May the management body may acquire and
such assessments to other liens either hold, for the benefit of the condominium
generally or specifically described; owners, tangible and intangible personal
For conditions, other than those provided for property and dispose of the same by sale or
in Sections 8 and 13 of the Act, upon otherwise?
which partition of the project and
dissolution of the condominium Yes, unless otherwise provided for by the
corporation may be made. declaration of restrictions.
Note: The beneficial interest in such personal
Note: Such right to partition or dissolution property shall be owned by the condominium
may be conditioned upon: owners in the same proportion as their respective
failure of the condominium owners to interests in the common areas.
rebuild within a certain period;
specified inadequacy of insurance A transfer of a condominium shall transfer to the
proceeds; transferee ownership of the transferor's beneficial
specified percentage of damage to the interest in such personal property.
building;
a decision of an arbitrator; or CONDOMINIUM CORPORATIONS
upon any other reasonable condition.
Q: What is a condominium corporation?
What is the duty of the Register of Deeds as
regards this declaration of restrictions? A corporation specially formed for the purpose, in
which the holders of separate interest shall
The Register of Deeds shall enter and annotate automatically be members or shareholders, to the
the declaration of restrictions upon the certificate exclusion of others, in proportion to the
of title covering the land included within the appurtenant interest of their respective units in
project, if the land is patented or registered under the common areas.
the Land Registration or Cadastral Acts.
Note: As regards title to the common areas,
POWERS OF AND RESTRICTIONS UPON including the land, or the appurtenant interests in
MANAGEMENT BODY such areas, these may be held by a condominium
corporation.
What are the restrictions imposed by the law
upon corporations which is also the What is the term of a condominium corporation?
management body of the condominium project?
Co‐terminus with the duration of the
The restrictions are as follows: condominium project, the provisions of the
Corporation Law to the contrary notwithstanding.
The corporate purposes of such a
corporation shall be limited to the:
holding of the common areas, either in Membership
ownership or any other interest in
real property recognized by law, What are the rules regarding membership in a
management of the project, and condominium corporation?
to such other purposes as may be
necessary, incidental or convenient Membership in a condominium corporation,
to the accomplishment of said regardless of whether it is a stock or non‐stock
purposes. corporation, shall not be transferable separately
The articles of incorporation or by‐laws of from the condominium unit of which it is an
the corporation shall not contain any appurtenance.
provision contrary to or inconsistent
with the: Note: When a member or stockholder ceases to own
provisions of the Act; a unit in the project in which the condominium
enabling or master deed; or corporation owns or holds the common areas, he
declaration of restrictions of the shall automatically cease to be a member or
project. stockholder of the condominium corporation.
CIVIL LAW TEAM:
SALES
May a condominium corporation sell, exchange, superior rights of the corporation

lease or otherwise dispose of the common areas creditors.
owned or held by it in the condominium project?
Note: Such transfer or conveyance shall be
A: deemed to be a full liquidation of the
GR: During its existence, it cannot do so. interest of such members or stockholders
in the corporation.
XPN: If authorized by the affirmative vote of
all the stockholders or members. After such transfer or conveyance, the
provisions of this Act governing
Is the so called appraisal right under the undivided co‐ownership of, or
Corporation Code available to stockholders or undivided interest in, the common
members of a condominium corporation? areas in condominium projects shall
fully apply.
A:
GR: Not available. The law provides that “the When may voluntary dissolution of a
by‐laws of a condominium corporation shall condominium corporation be allowed?
provide that a stockholder or member shall
not be entitled to demand payment of his A condominium corporation may be voluntarily
shares or interest in those cases where such dissolved only:
right is granted under the Corporation Law when the enabling or the master deed of the
xxx” project in which the condominium
corporation owns or holds the common
XPN: If said stockholder or member consents area is revoked; and
to sell his separate interest in the project to upon a showing that:
the corporation or to any purchaser of the three years after damage or destruction
corporation's choice who shall also buy from to the project in which the
the corporation the dissenting member or corporation owns or holds the
stockholder's interest. common areas, which damage or
destruction renders a material part
Note: In case of disagreement as to price, the thereof unfit for its use prior
procedure set forth in the appropriate thereto, the project has not been
provision of the Corporation Law for valuation rebuilt or repaired substantially to
of shares shall be followed. its state prior to its damage or
destruction; or
The corporation shall have two years within
which to pay for the shares or furnish a damage or destruction to the project
purchaser of its choice from the time of award. has rendered one‐half or more of
the units therein untenantable and
All expenses incurred in the liquidation of the that more than thirty percent of
interest of the dissenting member or the members of the corporation, if
stockholder shall be borne by him. non‐stock, or the shareholders
representing more than thirty
percent of the capital stock
Dissolution and Liquidation entitled to vote, if a stock
corporation, are opposed to the
What is the effect of involuntary dissolution of a repair or reconstruction of the
condominium corporation for any of the causes project, or
provided by law?
the project has been in existence in
A: excess of fifty years, that it is
The common areas owned or held by the obsolete and uneconomical, and
corporation shall, by way of liquidation, that more than fifty percent of the
be transferred pro‐indiviso and in members of the corporation, if
proportion to their interest in the non‐stock, or the stockholders
corporation to the members or representing more than fifty
stockholders thereof, subject to the percent of the capital stock
entitled to vote, if a stock
corporation, are opposed to the
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repair or restoration or remodeling the corporate and of individual condominium

or modernizing of the project; or creditors.
the project or a material part thereof What should the Court do if, in an action for
has been condemned or partition of a condominium project or for the
expropriated and that the project dissolution of condominium corporation on the
is no longer viable, or that the ground that the project or a material part
members holding in aggregate thereof has been condemned or expropriated,
more than seventy percent interest the Court finds that the conditions provided for
in the corporation, if non‐ stock, or in the Condominium Act or in the declaration of
the stockholders representing restrictions have not been met?
more than seventy percent of the
capital stock entitled to vote, if a The Court may decree a reorganization of the
stock corporation, are opposed to project, declaring which portion or portions of the
the continuation of the project shall continue as a condominium project,
condominium regime after the owners thereof, and the respective rights of
expropriation or condemnation of said remaining owners and the just
a material portion thereof; or compensation, if any, that a condominium owner
may be entitled to due to deprivation of his
property.
the conditions for such a dissolution set
forth in the declaration of Note: Upon receipt of a copy of the decree, the
restrictions of the project in which Register of Deeds shall enter and annotate the same
the corporation owns or holds the on the pertinent certificate of title.
common areas, have been met.
Assessment, Notice thereof and Lien Created
Note: action for voluntary dissolution is that under
Rule 104 of the Rules of Court. If real property has been divided into
condominiums, how will it be assessed for
May the members or stockholders of a taxation purposes?
condominium corporation dissolve such
corporation? Each condominium separately owned shall be
separately assessed, for purposes of real property
Yes, by the affirmative vote of all the stockholders taxation and other tax purposes to the owners
or members thereof at a general or special thereof and the tax on each such condominium
meeting duly called for the purpose: Provided, shall constitute a lien solely thereon.
that all the requirements of Section 62 of the
Corporation Law are complied with. Who should pay for an assessment upon any
condominium made in accordance with a duly
registered declaration of restrictions?
What is the consequence of voluntary
dissolution of a condominium corporation? It is an obligation of the owner thereof at the time
the assessment is made.
A:
GR: The corporation shall be deemed to hold What are the rules as regards the notice of
a power of attorney from all the members or assessment?
stockholders to sell and dispose of their
separate interests in the project. The notice:
XPN: Unless otherwise provided for in the is to be registered with the Register of Deeds
declaration of restrictions of the city or province where such
condominium project is located.
How is a condominium corporation liquidated? shall state the following:
amount of such assessment and such
Liquidation of the corporation shall be effected by other charges thereon as may be
a sale of the entire project as if the corporation authorized by the declaration of
owned the whole thereof, subject to the rights of restrictions,
a description of the condominium unit
against which same has been
assessed, and
CIVIL LAW TEAM:
SALES
the name of the registered owner What are the rules as regards labor performed or
thereof. services or materials furnished?
Such notice shall be signed by an authorized
representative of the management A:
body or as otherwise provided in the If with the consent of or at the request of a
declaration of restrictions. condominium owner or his agent or his
contractor or subcontractor:
What is the effect if the management body GR: it shall not be the basis of a lien
causes a notice of assessment to be registered against the condominium of any other
with the register of deeds? condominium owner
XPN: such other owners have expressly
The amount of any such assessment plus any consented to or requested the
other charges thereon, such as interest, costs performance of such labor or furnishing
(including attorney's fees) and penalties, as such of such materials or services.
may be provided for in the declaration of
restrictions, shall be and become a lien upon the Note: Such express consent shall be
condominium assessed. deemed to have been given by the
owner of any condominium in the
Note: Effect of payment: Upon payment of said case of emergency repairs of his
assessment and charges or other satisfaction condominium unit.
thereof, the management body shall cause to be
registered a release of the lien. If performed or furnished for the common
areas and if duly authorized by the
What are the rules as regards the lien created in management body provided for in a
case of unpaid assessments, etc? declaration of restrictions governing the
property: shall be deemed to be
A: performed or furnished with the
GR: Such lien shall be superior to all other express consent of each condominium
liens registered subsequent to the owner.
registration of said notice of assessment
XPNs: How may an owner of any condominium remove
real property tax liens are superior; his condominium from a lien against two or
when declaration of restrictions provide for more condominiums or any part thereof?
the subordination thereof to any other
liens and encumbrances. By payment to the holder of the lien of the
fraction of the total sum secured by such lien
What is the rule as regards enforcement of the which is attributable to his condominium unit.
lien?
Such liens may be enforced in the same manner

provided for by law for the judicial or extra‐
judicial foreclosure of mortgages of real property.
Can the management body bid in the foreclosure

sale based on the lien for unpaid assessments?
A:
GR: No, the management body shall have
power to bid at foreclosure sale.
XPN: Unless otherwise provided for in the

declaration of restrictions,
Note: The condominium owner shall have the

same right of redemption as in cases of judicial or
extra‐judicial foreclosure of mortgages.
de

Sales: Chose in Possession

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Sales: Chose in Possession

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SALES

SALES b. Illicit object

A: By the contract of sale, one of the contracting ABSOLUTE SALE

parties obligates himself to transfer the Q: When is a sale absolute?

A: As to: Q: When is a deed of sale considered absolute in

23 Validity or defect of the transaction:

23 Distinguish a conditional sale from an B. ESSENTIAL REQUISITES

A: Q: What are the elements of a contract of sale?

Note: Statute of Frauds applies only to executory

CIVIL LAW TEAM:

0 Are there instances where the Statute of B. OPTION CONTRACT

5888 Yes. 5888 A contract granting a privilege in one

With a Original offer is extinguished

0 It is a right of first priority, all things and A:

CIVIL LAW TEAM:

23Yes, the grant of such right must be clear and

CIVIL LAW TEAM:

Q: When is an auction sale perfected? D. OBLIGATIONS CREATED

0 A sale by auction is perfected when the OBLIGATIONS OF THE BUYER

E. CHARACTERISTICS OF A CONTRACT OF SALE 2. Barter

1 Distinguish Sale from the following: SALE LEASE

Use of thing is for

CIVIL LAW TEAM:

0 CONTRACT TO SELL document entitled "Receipt of Down Payment"

A: 1. Unemancipated minors(Art. 1327, NCC);

sell property to each other, except:

Executors and Property of the estate under

CIVIL LAW TEAM:

0 Who are those persons specially disqualified

5889 Atty. Leon G. Maquera acquired his client’s

0 No. Article 1491 (5) of the New Civil Code

CIVIL LAW TEAM:

IV. OBLIGATION OF THE SELLER

0 Should the seller be the owner at the time of

XPN: Foreclosure sale wherein the mortgagor

3. When the sale is made under statutory existence as long as

B. SALE BY A PERON HAVING A VOIDABLE TITLE A. MEANING OF PRICE

with voidable title over the object?

1. If Co nsent is vitiated (may be annulled Q: Is payment of the purchase price essential to

A: discretion of one of the parties. However, if the price

reality a donation or some other act or

A: Generally the market price at the time and

place fixed by the contract or by law for the

F. MANNER OF PAYMENT 5888Distinguish the failure to pay the

0 When is payment considered option money?

5888 Payment is considered option money

CIVIL LAW TEAM:

EARNEST MONEY Simeon suddenly has a change of heart, claiming

money? performance prosper? Explain.

money. proceed with the sale by the fact that

0 Bert offers to buy Simeon's property under

Validity of 0.256 Allowing buyer to make use of

C. KINDS OF DELIVERY GR: There is presumption of delivery

Q: What are the different kinds of delivery? XPN:

CIVIL LAW TEAM:

0 Given that actual possession, control and A:

5888 Can delivery be effected through a carrier? A:

0 Who owns the movables inside the house? 0

0 What is the effect of the loss of the thing

IX. DOCUMENTS OF TITLE Non‐Negotiable Documents of Title

Q: What is a Document of Title? Q: What are Non‐negotiable documents of title?

0 A document used in the ordinary course of A:

A: 0 What are the warranties of seller of documents